A Critical Study on Impact of Working Capital Management on Profitability of Manufacturing Industry in India (A Study on Paint Industry)
Journal Title: IOSR journal of Business and Management - Year 2018, Vol 20, Issue 2
Abstract
After making a thorough review of literature the observation is that profitability of any firm has significant importance on working capital management of those particular firms which refers to the management of working capital, or to the management of current assets. A firm's working capital consists of its investments in current assets, which includes short-term assets—cash and bank balance, inventories, receivable and marketable securities. Firms can achieve optimal management of working capital by making the trade-off between profitability and liquidity. The profitability liquidity trade off is important because if working capital management is not given due considerations then the firms are likely to fail and face bankruptcy. Working capital management is one of the most important areas while making the comparisons of liquidity and profitability within the firms, involving the decision of the amount and composition of current assets and the financing of these assets. This study explores the impact of working capital management on the profitability of firms in the paint industry. The efficiency of working capital management can been measured by Inventory Turnover Period, Account Receivable Period, Days Payables Outstanding, Current Ratio and Quick assets ratio. This study attempted to fill the research gap by analyzing and test the relationship between the most important working capital variables. There is a positive correlation between some variables like return on assets and inventories maintained and negative correlation between return on assets and average receivable days, average collection period done in the paint industry.
Authors and Affiliations
MS. Vasavi Pravallika, DR. K. S. Sekhara Rao
Keywords
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- EP ID EP409663
- DOI 10.9790/487X-2002063747.
- Views 103
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