Empirical Study of Relationship of Working Capital Management and Profitability of Indian Passenger Car Manufacturing Sector
Keywords:
Working Capital, Creditors’ velocity, ProfitabilityAbstract
In this research paper attempts have been made to examine the role played by working capital management in terms of contributing towards profitability of passenger car manufacturing sector in India. The variables considered are Debtors, Inventory, Cash, Bank, Marketable Securities, Creditors and Profitability. The data was analyzed using various statistical techniques including multiple regression analysis. Auto- correlation test was carried out using Durbin Watson Statistics and Multi co-linearity test was carried out using matrix of coefficients of correlations and VIF statistics. The study revealed that inventory, debtors, cash, bank, and marketable securities have a very little role to play in determining the profitability. However, creditors’ velocity has negative association with profitability of the company but it is the most important factor influencing the profitability. This finding signals a shift of focus from current assets to the sources of working capital as far as profitability perspective is concerned.
References
Ahmad Ahmadpour, M. J. (2012, August). An Empirical Study of Association between Working Capital Management and Performance: Evidence from Tehran Stock Exchange. Journal of Social and Development Sciences, 3(8), 79-285.
AloyNiresh, J. (2012). Working Capital Management & Financial Performance Of Manufacturing Sector in Sri Lanka. European Journal of Business and Managem, 4(15), 23-31.
G.V.Chalam, N. a. (2014, October). Study on the Working Capital Management Efficiency in Indian Leather Industry- An Empirical Analysis. IRACST- International Journal of Research in Management & Technology (IJRMT), 4(5), 196-201.
Kaveri, V. S. (1985, August 31). Financing Qf Working Capital in Indian Industry. Economic and Political Weekly, 20(35), 123-128.
Nasr, A. R. (2007, March). Working capital management and profitability-case of Pakistani Firms. International Review of Business Research Papers, 3(1), 279-300.
Padachi*, K., Howorth1, C., & Durbarry3, M. S. (2010, June 28-29). Working Capital Structure and Financing Pattern of Mauritian SMEs. Oxford Business & Economics Conference Program, 1-9.
Padachi, K. (2006, October). Trends in Working Capital Management and its Impact on Firms’. International Review of Business Research Papers, 02(02), 45-58.
Petersen, S. M. (1993). Working Capital and Fixed Investment: New Evidence on Financing Constraints. The RAND Journal of Economics, 24(3), 328 342.
Richard Kofi Akoto, D.-V. a. (2013, December). Working capital management and profitability: Evidence from Ghanaian listed manufacturing firms. Journal of Economics and International Finance, 5(9), 373-379.
Samuel Mongrut, D. F. (2014). Determinants of Working Capital Management in Latin American Companies. Innovar: Revista de ciencias administrativas sociales, 24(51), 5-17.
Tom Jose V, A. S. (2013, March). Analysis of Inventory Control Techniques; A Comparative Study. International Journal of Scientific and Research Publications, 3(3), 1-6.
