The two main objectives of working capital management are to ensure that it has sufficient liquid resources to continue in business and to increase its profitability.
Every business needs adequate liquid resources to maintain day to day cash flow. It needs enough to pay wages, salaries and accounts payable if it is to keep its workforce and ensure its supplies.
Maintaining adequate working capital is not just important in the short term. Adequate liquidity is needed to ensure the survival of the business in the long term. Even a profitable company may fail without adequate cash flow to meet its liabilities.
On the other hand, an excessively conservative approach to working capital management resulting in high levels of cash tied up in excessive inventories/receivables will harm profits, as excessive investment in these assets does not yield additional return.
These two objectives will often conflict, as liquid assets give the lowest returns.