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The Impact of Working Capital Management on Firm’s Performance of Selected Companies in Bombay Stock Exchange

Journal: International Journal of Advanced Scientific Research & Development (IJASRD) (Vol.04, No. 07)

Publication Date:

Authors : ; ;

Page : 19-49

Keywords : Working Capital Management; Average Collection Period; Average Inventory Period; Average Payment Period; Cash Conversion Cycle; Return on Assets; Manufacturing Companies.;

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Abstract

Working capital management is needed for day to day operations of a business firm. Working capital management involves administration of the most liquidity resources of the business firms which include cash and cash equivalents, inventories and trade and other receivables. Adequate management of working capital will result in achievement of maximum gross operating profit thus maintaining liquidity position and maximizing shareholders' wealth which is the central tendency of the goal of any firm. This study investigates the impact of working capital management on the firm's performance of selected companies in Bombay stock exchange for the period 2006-2015. The manufacturing company are taken for the research. The study determines a significant relationship between working capital management and corporate performance of manufacturing companies listed in BSE. The study found that the cash conservation cycle, inventory collection period and current ratio is positively correlated with return on assets, where time span of company between collection of inventory purchase and sales is better and payment of creditors back. The variance inflation factor indicates how much larger the standard error is, compared with the current ratio in the model were uncorrelated. The average payment period is statistically best model for explaining the dependent variable. It means the firm's performance is significantly affected by changes in all models.

Last modified: 2017-10-13 01:40:36