THE EFFECT OF WORKING CAPITAL MANAGEMENT ON THE PROFITABILITY OF FIRMS IN THE OIL AND GAS INDUSTRY IN INDIA

In this study, the impact of working capital management on the profitability of Oil and Gas firms in India has been examined. The study is conducted by analysing nine significant firms from the Oil and natural gas sector in the country. The selected sample represents a weightage of around 91 per cent of the Nifty Oil and Gas Index. The study makes use of purely secondary data which has been obtained from the audited annual reports of the companies studied. The various statistical methods applied in the study include descriptive analysis, Pearson's correlation and multiple regression using panel data. The study used variables such as current ratio, debt ratio, cash conversion cycle, operating revenue growth and size of the firms (measured using total assets) as the components of WCM. The proxy variable for the profitability of the entities is ROA. The results of the study reveal that cash conversion cycle has a negative relation to profitability, although the coefficient is not too high. This means that the managers need to focus on reducing the CCC to increase profitability. It was also noted that there was a significant inverse relationship between profitability and debt ratio.