The Effect of Working Capital Management on Firm Performance: A Study of Publicly-listed Manufacturing Companies in India

- Dr. Hitesh J. Shukla, Professor, Department of Business Management (MBA Programme), Saurashtra University, Rajkot, Gujarat, India

Abstract:

Efficient management of working capital plays a significant role in the better performance of Business firms. Working capital management efficiency is vital especially for manufacturing firms, where a major part of assets is composed of current assets. The broader objective of this paper is to know the impact of working capital management on firms’ performance. To know the efficient management of working capital, current assets ratio, current assets turnover, quick assets turnover, operating profit margin, current assets to total assets, current liabilities to total assets and stock to current assets ratios were calculated. For this purpose, sample is taken from manufacturing firms listed on BSE – 100 (Bombay Stock Exchange). Concluding remarks of the research makes us clear that high investment in inventories and receivables is associated with lower profitability. Study also revealed significantly higher impact of working capital turnover ratio or activities ratio on profitability of the sample firms. The research finds that size of the undertaking and nationality or geographical spaces have no bearing on relationship between working capital and financial performance of the firms. The conclusion is in line with previous researches. It means quality of working capital management is a critical factor in liquidity and profitability of a firm irrespective of size of firm.

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