Effect of Working Capital Management on Firm’s Profitability- A Comparative Study of Ultratech Cement and India Cements
- Country : India
- Subject : Commerce
Keywords : working capital, management, cement industry, profitability
Abstract
Working capital management is concerned with short-term investment and financing decision of an entity. It is a major business requirement and a significant part of corporate finance. Efficient management of working capital means the management of various components of working capital in such a way that an adequate amount of the working capital is maintained for smooth running of a firm. An optimal working capital management is expected to contribute positively to the creation of firm value. To reach optimal working capital management, firm manager should control the tradeoff between profitability and liquidity accurately. The purpose of this study is to examine the impact of working capital management on the profitability of UltraTech Cement and India Cements. Return on capital employed (ROCE) is used as dependent proxy variable for the profitability and current ratio, debtors turnover ratio, and inventory turnover ratio are used as independent proxy variables for the working capital management. The findings show that there is a significant impact of working capital management on the profitability of UltraTech Cement but insignificant impact has been found on the profitability of India Cements.
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