Article : The Impact Of Working Capital Management Practices On Firms Profitability

Title

The Impact Of Working Capital Management Practices On Firms Profitability

Author

Biswajit Bose

The rapid and un-predictive business changes make the business markets all over the world more competitive and exert competitive pressures on the firms. It is characterized by considerable amount of uncertainty regarding the demand, market price, and availability of raw materials. The markets in which real firms operate are not perfectly competitive. Hence this necessitates the firms to have working capital to meet the demand.
Working capital management is a very important aspect of corporate Finance. The study has been undertaken to examine the management of finance playing a crucial role in the growth. It is concerned with examining the structure of liquidity position and profitability position of six major sectors such as Auto ancillaries, Sugar, Pharmaceuticals, Engineering, Fertilizers and electric equipment. The research design followed for this study is descriptive research of the working capital management of the above sectors. For analyzing the data, an in depth research analysis and various statistical tools and techniques were used. The data for analysis is collected from the financial statements published in the annual reports and some of the data has been collected through interviews and questionnaire. It was found that the study of working capital management of the company is very effective and also the firm has to maintain the liquidity and solvency position to repay its obligations in time.
The purpose of this paper is to examine the trends in working capital management and its impact on firms’ profitability. The dependent variable, return on total assets (ROTA) is used as a measure of profitability and the relation between working capital management is investigated for a sample of 30 manufacturing firms using panel data analysis for the period 2004-2012.

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