Impact of Working Capital Management on Profitibility of Firms

3531 WordsAug 3, 201015 Pages
EFFECT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY OF FIRMS - A study on the Indian Oil Drilling & Exploration industrY [1]Dr. Anupam Jain ABSTRACT Efficient management of working Capital is one of the pre-conditions for the success of an enterprise. Efficient management of working capital means management of various components of working capital in such a way that an adequate amount of 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 trade off between profitability and liquidity accurately. The purpose of this study is to investigate the…show more content…
For measuring the efficiency of working capital management, performance, utilization, and overall efficiency indices were calculated instead of using some common working capital management ratios. Setting industry norms as target-efficiency levels of the individual firms, this paper also tested the speed of achieving that target level of efficiency by an individual firm during the period of study. Findings of the study indicated that the Indian Cement Industry as a whole did not perform remarkably well during this period. Dr. D. Mukhopadhyay conducted a research study to examine working capital management practices and the problems faced by the firms in working capital management process particularly in heavy engineering industries. A sick engineering firm named "M/S Heavy Engineering Company Limited” had been selected and data from 1993-94 to 2002-03 had been analyzed. He reported that, the company has under its possession huge real estate including land and the firm holds legacy of culture and heritage of more than two hundred years of existence in industrial map of the country and as a consequence, it has built up "Goodwill" to a remarkable extent. Thus the company may make revaluation of real estate including land and other assets and make valuation of goodwill and disposal of

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