Corporate finance relies on two indispensable pillars for resource allocation: Capital Budgeting and Working Capital Management (WCM). While both aim to maximize shareholder value, they operate on vastly different scales. Capital Budgeting is the critical process of evaluating and selecting large, long-term investments, such as acquiring new machinery, building a new plant, or initiating a major expansion project, all of which are expected to generate returns over an extended period. In contrast, Working Capital Management is the management of a company’s current assets (like cash, accounts receivable, and inventory) and current liabilities (such as accounts payable and short-term debt). Its goal is to optimize day-to-day liquidity and operational profitability.

Time Horizon and Objectives

The core difference lies in the financial timeline and ultimate objective. Capital Budgeting decisions are inherently Long-term, typically spanning five years and often decades. Its objective is strategic: to maximize shareholder wealth through foundational growth, market …