Impact of Working Capital Management on Profitability of Indian Company

Abstract

Liquidity and profitability are both the two different sides of same coin. Optimum level of Working capital Management plays an important role liquidity guarantees a firm to meet their shortin any business organization. It reveals the term debts and the proper management of flow management's efficiency of decision making can be promised by a profitable business. regarding short-term financing need of the business. Liquidity shows the ability of company in Corporate finance literature and finance practitioners have the notion that the efficient working capital responding to short-term obligations. A firm Management (WCM) affects the firm value. The main ought to optimize its liquidity and profitability purpose of this study is to empirically test the impact while conducting its daily business operations. of working capital management on profitability. To Working Capital Management contains investigate the relationship between WCM and proportion balance of working capital Profitability, we have collected secondary data from components i.e. -debtors, inventory and Mahindra and Mahindra Limited Company listed in payables and the use of cash effectively for daily Bombay stock exchange and National Stock Exchange business operations. Proper optimization of for the period of 2004 to 2017. The data has been working capital balance means minimizing the collected from the website of the company. We have working capital requirement and realizing collected the details from the balance sheet, profit and maximum possible revenues (Ganesan, 2007). loss statement.There is a strong direct relationship between In this study, we use variable of Return on Assets profitability of the firm and its working capital ratio, Return on Net worth, Net profit Margin and efficiency. Profit is determined by deducting Gross Profit Margin to measure the profitability of expenses from the revenue incurred in company and variables of Debtors turnover, creditors' generating that revenue. The amount of profit turnover, inventory turnover, current ratio, quick can be a good measure of the performance of a Ratio and cash ratio as working capital management company, so we can use profitability as a criteria.measure of the financial performance of a The results of the research show that there is a no company, as well as, profitability is the promise significant impact of the working capital management for a company to remain a going concern in the on the profitability of the company. We have to find world of business. Proper Working capital out the other factors which affect the profitability.

Working Capital Management on the Firm’s Profitability of Steel Sector Firms in India

“…Should there be a spike in the ICP, the companies’ profitability will suffer dramatically. These are similar results found in the study (Chand et al, 2019; Mahato & Jagnnathan, 2016). In model 4, the coefficient of FA and FS is negative and significant, depicting the inverse relationship between FA and FS and ROE.…”

“…The fact that the coefficient of CCC in model 4 has a negative value and is substantial indicates that it has an inverse relationship with ROE; this means that if the CCC is raised, the company’s profitability will drop by a sizeable amount. Similar results were also found in the study (Chand et al, 2019; Mahato & Jagnnathan, 2016; Makori & Jagongo, 2013). Although the coefficient of FA and FS is significant and negative in model 4, it represents an inverse relationship with ROE.…”

“…It is significant and negative that the CCC coefficient is negative in model 3, which indicates that the profitability of the firm will decline significantly when the ROA is increased. The results are consistent with Chand et al (2019), Mahato and Jagnnathan (2016), Makori and Jagongo (2013), Pham et al (2020), and Shab and Sana (2005). The statistic of RCP is positive and insignificant in model 3, whereas the statistic of APP is negative and insignificant in model 3.…”

The moderating effect of cost of capital on working capital management and firm's performance in Nigeria

“…IHP assists a manager in controlling the risk of 'stock-outs' and periodic sales, which help to improve customer demand and decrease ordering carrying costs. The research studies of Singh, Kumar, and Colombage (2017) [50] ; Mahato et al (2016) [32] ; Vartak et al (2019) [58] ; (Lampty et al, (2017) [28] and Samiloglu et al (2016) [46] found a negative relationship between IHP and profitability. But, the studies by Simon et al (2019); Amponsah-Kwatiah et al (2020) [10] ; Zeidan et al (2017) [60] ; and.…”

Impact of working capital management on profitability of Indian manufacturing companies

“…"Working Capital Management" (WCM) refers to the choices an organization makes about its short-term investments and financing, which can affect a corporation's liquidity. The terms "current assets" and "current liabilities" are included in the definition of components of working Capital (Mahato and Jagannathan, 2016;Naskar and Guha, 2016;Boruah, 2020; Yadav and Singh, 2020) [46, 21, 58,] . Current assets include things like cash, accounts receivable, and inventories.…”