WORKING CAPITAL MANAGEMENT AND FIRM PROFITABILITY: A STUDY OF LISTED COMPANIES IN INDIAJournal: International Journal of Management (IJM) (Vol.8, No. 6)
Publication Date: 2017-12-26
Authors : ARPITA NASKAR; PRASANTA GUHA;
Page : 152-162
Keywords : Working capital management; Firm’s profitability; ROA; ROE; RD; CCC;
Financing decision of an entity bears relation with working capital management. It is a part of short term financing. The study of corporate finance is also linked with Working capital management. Thus, this study sought to examine the effect of working capital management on profitability of select companies listed in BSE The study used a sample of 53 companies. The study used secondary data for a period of 5 years from 2011 – 2015. The data have been analysed using the Pearson correlation and the multivariate regression analysis. The study has revealed that the all components of working capital namely Receivable days( RD), Payable days(PD), Inventory holding periods ( ID), Current ratio ( CR) and Quick ratio ( QR) have strong impact on profitability. Cash conversion cycle (CCC) is negatively related with the profitability, Firm size is also linked with working capital. If firm size increases, the need of working capital will be more. It has been found that the firm size has also significant impact on EBIT but insignificant impact on ROA and ROE. Finally the study has established a relation between working capital management and firm's profitability.
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