Version 1
: Received: 5 December 2023 / Approved: 6 December 2023 / Online: 6 December 2023 (10:44:00 CET)
Version 2
: Received: 8 December 2023 / Approved: 12 December 2023 / Online: 12 December 2023 (11:12:48 CET)
Version 3
: Received: 12 December 2023 / Approved: 13 December 2023 / Online: 13 December 2023 (05:03:58 CET)
Panigrahi A, Working capital management strategies and financial performance: A cause-and-effect analysis. J Manag Res Anal 2024;11(1):3-11
Panigrahi A, Working capital management strategies and financial performance: A cause-and-effect analysis. J Manag Res Anal 2024;11(1):3-11
Panigrahi A, Working capital management strategies and financial performance: A cause-and-effect analysis. J Manag Res Anal 2024;11(1):3-11
Panigrahi A, Working capital management strategies and financial performance: A cause-and-effect analysis. J Manag Res Anal 2024;11(1):3-11
Abstract
Optimum usage of working capital is always considered the key to the success of an enterprise. There is much evidence in the financial literature that an efficient management of working capital has a positive impact on the performance of the organisation. Results of empirical analysis show that there is a strong relationship between the firm’s profitability and its working capital management efficiency i.e., optimization of working capital. Present research work is an endeavour in this direction of establishing the factual importance of efficient management of working capital to any organization, particularly to Indian cement companies. The research work is backed by a research design of methodology including objectives, scope, significance, hypotheses, tools, techniques, etc. To make it more comprehensive in its approach, it is designed with both descriptive and econometric tools. The study employs a quantitative approach to examine whether the Indian cement companies optimally use their working capital, which is analysed by establishing the relationship between the working capital management and profitability using 11-year (2010-2021) financial data of 31 cement companies listed in Bombay Stock Exchange (BSE).
Findings: The study shows that the inventory turnover period (ITP) and cash conversion cycle (CCC) have a negative impact on returns on assets (ROA) whereas the accounts receivable period (ARP) does not significantly predict the return on assets of cement companies. The current ratio (CR) is negatively related to ROA whereas the quick ratio (QR) favourably predicts ROA of the cement companies. It was observed that only ITP and CCC are significantly related to return on equity (ROE) where the direction of the relationship is negative.
Keywords
Working Capital Management, Profitability, Cement Industry, Bombay Stock Exchange, Panel Data, India.; Working Capital Management
Subject
Business, Economics and Management, Finance
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
