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Sensitivity of profitability to working capital management: a study of Indian corporate hospitals

Author

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  • Mohammad Talha
  • S. Benjamin Christopher
  • A.L. Kamalavalli

Abstract

Working capital management almost always determines the ability of a firm to earn profit. Efficiency with which a firm handles working capital ensures prosperity while neglect would spell danger for the very survival of the firm. The study focuses on the impact of working capital management on profitability of selected Indian corporate hospitals. The time span is ten years from 1996 to 2006. The results of regression analysis point out that the current ratio, cash turnover ratio, proportion of current assets to operating income and leverage have a negative influence on profitability. Stepwise regression analysis has identified seven prominent variables that significantly influence profitability. Path analysis reveals that 'quick ratio' has the highest direct effect on profitability, while 'current ratio' has the least direct effect.

Suggested Citation

  • Mohammad Talha & S. Benjamin Christopher & A.L. Kamalavalli, 2010. "Sensitivity of profitability to working capital management: a study of Indian corporate hospitals," International Journal of Managerial and Financial Accounting, Inderscience Enterprises Ltd, vol. 2(3), pages 213-227.
    • Handle: RePEc:ids:injmfa:v:2:y:2010:i:3:p:213-227
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    Cited by:

    1. Yakubu, Ibrahim Nandom & Alhassan, Mohammed Mubarik & Fuseini, Abdul-Aziz, 2017. "The Impact of Working Capital Management on Corporate Performance: Evidence from Listed Non-Financial Firms in Ghana," MPRA Paper 95113, University Library of Munich, Germany.
    2. Sari Viskari & Anita Ruokola & Miia Pirttilä & Timo Kärri, 2012. "Advanced model for working capital management: bridging theory and practice," International Journal of Applied Management Science, Inderscience Enterprises Ltd, vol. 4(1), pages 1-17.
    3. Rafal Siedlecki & Pawel Predkiewicz & Agnieszka Bem & Aleksandra Szpulak, 2021. "Working Capital Management in Hospitals: Evidence from Poland," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 1), pages 836-850.
    4. Sujan Chandra Paul & Md. Asiqur Rahman & Jiasmin, 2021. "Current Assets, Current Liabilities and Profitability: A Cross Industry Analysis," Journal of Asian Business Strategy, Asian Economic and Social Society, vol. 11(1), pages 55-68, June.

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