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Impact of Working Capital Efficiency on Firms’ Profitability: A Study on Manufacturing Sector in India


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1 Apeejay School of Management, Sector 8 Dwarka, Dwarka, New Delhi, India
     

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The study highlights the efficiency of manufacturing companies in India in managing their day to day requirements for capital which may have an impact on the profitability of a concern. The concept has been studied before by many academicians. However, the set of study has not been performed for the selected time period and with the sample companies. S&P BSE Stocks as per their market capitalization have been taken from 2009-16. The conversions of sale into cash and profit margins have been incorporated in the study. Using Panel data regression analysis in STATA, results have been interpreted showing significant impact of efficiency in management of operating capital vis-a-vis profits in the firm. The cash conversion cycle of sample companies has significantly affected their net profit margin. It may be deduced from the results that the short term capital managerial efficiency is an important variable and has the capacity to influence profit margins in case of manufacturing units.

Keywords

Gross Operating Cycle, Net Operating Cycle, Net Profit Margin, Profitability, Working Capital Management.
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  • Impact of Working Capital Efficiency on Firms’ Profitability: A Study on Manufacturing Sector in India

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Authors

Parul Bhatia
Apeejay School of Management, Sector 8 Dwarka, Dwarka, New Delhi, India
Priya Gupta
Apeejay School of Management, Sector 8 Dwarka, Dwarka, New Delhi, India

Abstract


The study highlights the efficiency of manufacturing companies in India in managing their day to day requirements for capital which may have an impact on the profitability of a concern. The concept has been studied before by many academicians. However, the set of study has not been performed for the selected time period and with the sample companies. S&P BSE Stocks as per their market capitalization have been taken from 2009-16. The conversions of sale into cash and profit margins have been incorporated in the study. Using Panel data regression analysis in STATA, results have been interpreted showing significant impact of efficiency in management of operating capital vis-a-vis profits in the firm. The cash conversion cycle of sample companies has significantly affected their net profit margin. It may be deduced from the results that the short term capital managerial efficiency is an important variable and has the capacity to influence profit margins in case of manufacturing units.

Keywords


Gross Operating Cycle, Net Operating Cycle, Net Profit Margin, Profitability, Working Capital Management.

References





DOI: https://doi.org/10.18311/gjeis%2F2018%2F20739