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Working Capital Management and Its Impact on Profitability: A Case of Indian Oil Corporation Ltd

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  • Tanushree Sharma
  • Utkarsh Rathore

Abstract

Management of working capital is a crucial task for every manager in an organization, because it directly affects the liquidity and profitability of an organization. The present study investigates the importance of working capital management and its impact on profitability of Indian Oil Corporation Ltd. (IOCL). A few important ratios have been considered for highlighting the efficiency of working capital management. Pearson’s simple correlation coefficient has been applied for measuring the degree of relationship between the working capital management and profitability. The results revealed that out of eight ratios relating to working capital management, four ratios, viz., Current Ratio, Current Assets to Total Assets Ratio, Current Assets to Sales Ratio, and Cash Turnover Ratio, registered positive association with the selected profitability ratio (ROI), and the remaining ratios like Debtors Turnover Ratio, Inventory Turnover Ratio, Working Capital Turnover Ratio and Quick Ratio witnessed a negative association with the selected profitability ratio.

Suggested Citation

  • Tanushree Sharma & Utkarsh Rathore, 2013. "Working Capital Management and Its Impact on Profitability: A Case of Indian Oil Corporation Ltd," The IUP Journal of Accounting Research and Audit Practices, IUP Publications, vol. 0(3), pages 53-63, July.
    • Handle: RePEc:icf:icfjar:v:12:y:2013:i:3:p:53-63
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