Evaluating the Impact of Working Capital Management Components on Corporate Profitability: Evidence from Indian Manufacturing Firms
Working capital management is a vital issue in financial decision making since it is a part of investment in asset and it directly affects the liquidity and profitability of the company. The study tries to investigate the relationship between working capital management components and the profitability of a sample of Indian manufacturing firms using a sample of 311Indian manufacturing firms for a period of 14 years from 1996-97 to2009-10 and have studied the effect of different variables of working capital management including the average collection period, inventory turnover in days, average payment period, cash conversion cycle and current ratio,debt ratio, size of the firm and financial assets to total assets ratio on the net operating profitability of Indian firms. The result suggests a strong negative relationship between the measures of working capital management including the number of days accounts receivable and cash conversion cycle, financial debt ratio with corporate profitability. Previous studies regarding the average days of accounts payable reported negative correlation of this variable and the profitability of the firm. But, we have not found any statistically significant relationship between these variables. Finally, we found insignificant negative relationship between firm size and its net operating profit ratio.
Volume (Year): 2 (2012)
Issue (Month): 3 (July)
|Contact details of provider:|| Postal: |
Web page: http://www.ijept.org
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:aes:ijeptp:v:2:y:2012:i:3:p:127-136. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catalin Boja)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.