Working Capital Management and Profitability in State Owned Companies: A Case Analysis of National Fertilizers Ltd.

The present study is conducted to further extend the prior studies to examine the relationship between efficient working capital management and financial performance (profitability) in a state owned company. For this purpose we have selected National Fertilizer Ltd. We have sourced data from audited financial statements of company from year 2000-01 to 2011-12 and compiled as per study requirement. The working capital ratios were used as independent variable and profitability (ROE) has been used as dependent variable to test the hypothesis. Data has been analyzed using correlation and regression statistics. The results shows that the ratios such as Working Capital Ratio, Acid Test Ratio, Current Assets to Total Assets Ratio, Inventory Turnover Ratio, Debtors Turnover Ratio and Cash Turnover Ratio, had either a negative or lower degree of positive correlation with profitability.