This document provides an analysis of the relationship between working capital management and profitability for Indian companies from 2005-2010. It discusses key concepts around working capital, including how it refers to current assets and liabilities required for short-term financing. Prior research has shown that both excessive and low levels of working capital can negatively impact profitability. The document reviews literature on working capital management and profitability relationships. It aims to contribute to understanding how working capital management impacts profitability to help managers make decisions that create shareholder value, especially in emerging markets like India.
The Effect of Working Capital Management on Profitability of Cement Manufactu...iosrjce
IOSR Journal of Economics and Finance (IOSR-JEF) discourages theoretical articles that are limited to axiomatics or that discuss minor variations of familiar models. Similarly, IOSR-JEF has little interest in empirical papers that do not explain the model's theoretical foundations or that exhausts themselves in applying a new or established technique (such as cointegration) to another data set without providing very good reasons why this research is important.
This document summarizes a research study that examined the relationship between working capital management and profitability for non-listed firms in Ghana from 2004-2009. The study used cash conversion cycles and its components (days of receivables, days of inventory, and days of payables) as measures of working capital management. Gross operating profit to total assets was used as the measure of firm performance. The results showed that profitability was negatively related to the length of the cash conversion cycle. Specifically, performance was positively affected by reducing days of receivables and days of inventory. Additionally, firm size, GDP growth, and sales growth positively impacted performance. The study suggests that managers in emerging markets should focus on effective working capital management to improve
Impact of working capital on firm profitabilityWaqas Mehmood
This document analyzes the impact of working capital management on the profitability of sugar and leather firms in Pakistan. It examines secondary data from 5 sugar and 5 leather firms over 2008-2012. The key variables studied are cash conversion cycle, interest coverage ratio, debt-equity ratio, age of inventory, age of debtors, age of creditors, and return on assets. The study aims to determine if there is a significant relationship between working capital management and firm profitability. The results could help managers optimize working capital levels to improve financial performance.
Impact of working capital on profitabilityNuzzar Naseem
This document summarizes a research study that examined the impact of working capital management on the profitability of firms in Pakistan under different business cycles. The study found that cash conversion cycle and accounts receivable showed a negative relationship with firm profitability in different cycles. Inventory had a positive impact on profitability in boom periods. Accounts payable positively impacted profitability in recessions. The study concluded that efficient working capital management can increase firm profitability.
The impact of working capital management on firm profitability in different b...Rifat Humayun
This paper investigates the effect of the business cycle on the link between working capital, the difference between current assets and current liabilities, and corporate performance.
Efficient working capital management is recognized as an important aspect of financial management practices in all organizational forms.
In acknowledgement of this importance, the CFO Magazine publishes an annual study of corporate working capital management performance in many countries.
Understanding the impact of working capital management practices on firm'sshamashah
Working capital management involves managing a firm's short-term assets and liabilities. This study examines the working capital management of two firms, BIL ENERGY LTD and TRANSFORMER LTD, over two years to analyze the relationship between working capital management efficiency and firm profitability. Various working capital ratios were calculated and correlated with return on total assets using Spearman's rank correlation. A strong inverse relationship was found between current ratio and return on total assets, indicating that too much emphasis on liquidity can harm profitability. Therefore, firms must maintain an optimum level of working capital to maximize profits without compromising liquidity.
This document summarizes a study on the impact of capital structure on stock prices in the cement sector of Pakistan. The study uses debt to equity ratio, debt to asset ratio, and interest coverage ratio as independent variables to examine their relationship with stock prices of cement companies. Eleven publicly traded cement companies from 2005 to 2009 were analyzed. The results found a negative relationship between capital structure and stock prices, indicating that higher debt is associated with lower stock prices. The document provides background on Pakistan's cement industry and the objectives of the study, which are to examine how firms structure capital, the relationship between capital structure and stock prices, and implications for investors.
The Effect of Capital Structure on Profitability of Energy American Firms:inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
The Effect of Working Capital Management on Profitability of Cement Manufactu...iosrjce
IOSR Journal of Economics and Finance (IOSR-JEF) discourages theoretical articles that are limited to axiomatics or that discuss minor variations of familiar models. Similarly, IOSR-JEF has little interest in empirical papers that do not explain the model's theoretical foundations or that exhausts themselves in applying a new or established technique (such as cointegration) to another data set without providing very good reasons why this research is important.
This document summarizes a research study that examined the relationship between working capital management and profitability for non-listed firms in Ghana from 2004-2009. The study used cash conversion cycles and its components (days of receivables, days of inventory, and days of payables) as measures of working capital management. Gross operating profit to total assets was used as the measure of firm performance. The results showed that profitability was negatively related to the length of the cash conversion cycle. Specifically, performance was positively affected by reducing days of receivables and days of inventory. Additionally, firm size, GDP growth, and sales growth positively impacted performance. The study suggests that managers in emerging markets should focus on effective working capital management to improve
Impact of working capital on firm profitabilityWaqas Mehmood
This document analyzes the impact of working capital management on the profitability of sugar and leather firms in Pakistan. It examines secondary data from 5 sugar and 5 leather firms over 2008-2012. The key variables studied are cash conversion cycle, interest coverage ratio, debt-equity ratio, age of inventory, age of debtors, age of creditors, and return on assets. The study aims to determine if there is a significant relationship between working capital management and firm profitability. The results could help managers optimize working capital levels to improve financial performance.
Impact of working capital on profitabilityNuzzar Naseem
This document summarizes a research study that examined the impact of working capital management on the profitability of firms in Pakistan under different business cycles. The study found that cash conversion cycle and accounts receivable showed a negative relationship with firm profitability in different cycles. Inventory had a positive impact on profitability in boom periods. Accounts payable positively impacted profitability in recessions. The study concluded that efficient working capital management can increase firm profitability.
The impact of working capital management on firm profitability in different b...Rifat Humayun
This paper investigates the effect of the business cycle on the link between working capital, the difference between current assets and current liabilities, and corporate performance.
Efficient working capital management is recognized as an important aspect of financial management practices in all organizational forms.
In acknowledgement of this importance, the CFO Magazine publishes an annual study of corporate working capital management performance in many countries.
Understanding the impact of working capital management practices on firm'sshamashah
Working capital management involves managing a firm's short-term assets and liabilities. This study examines the working capital management of two firms, BIL ENERGY LTD and TRANSFORMER LTD, over two years to analyze the relationship between working capital management efficiency and firm profitability. Various working capital ratios were calculated and correlated with return on total assets using Spearman's rank correlation. A strong inverse relationship was found between current ratio and return on total assets, indicating that too much emphasis on liquidity can harm profitability. Therefore, firms must maintain an optimum level of working capital to maximize profits without compromising liquidity.
This document summarizes a study on the impact of capital structure on stock prices in the cement sector of Pakistan. The study uses debt to equity ratio, debt to asset ratio, and interest coverage ratio as independent variables to examine their relationship with stock prices of cement companies. Eleven publicly traded cement companies from 2005 to 2009 were analyzed. The results found a negative relationship between capital structure and stock prices, indicating that higher debt is associated with lower stock prices. The document provides background on Pakistan's cement industry and the objectives of the study, which are to examine how firms structure capital, the relationship between capital structure and stock prices, and implications for investors.
The Effect of Capital Structure on Profitability of Energy American Firms:inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
This research proposal examines the impact of working capital management on the profitability of sugar and leather companies in Pakistan from 2008-2012. The objectives are to evaluate variables that impact profitability, verify the relationship between working capital management and profitability, examine the relationship between profitability and leverage, and analyze how asset management impacts financial performance. The methodology will use secondary data from 5 companies in each sector collected annually from 2008-2012. The sources will be evaluated for suitability, reliability, adequacy and accuracy. The research structure will include an introduction, objectives, problem statement, research questions, significance, literature review, methodology and bibliography.
This document summarizes a study that investigates the influence of working capital management on the performance of small and medium enterprises (SMEs) in Pakistan from 2006 to 2012. The study uses data from various sources on SMEs to examine the relationship between return on assets (used as a proxy for profitability) and variables like accounts receivable, inventory, cash conversion cycle, and accounts payable. The results suggest that days of accounts payable has a positive association with profitability, while average collection period, inventory turnover, and cash conversion cycle have an inverse relationship with performance. Firm size and sales growth also positively influence profitability, while debt ratio negatively impacts profitability.
Working Capital Management and Bank profitability in GhanaSamuel Agyei
This document examines the relationship between working capital management practices and profitability of banks in Ghana. It reviews previous empirical studies that have mostly found efficient working capital management, like reducing cash conversion cycles and accounts receivable periods, improves firm profitability. The study uses panel data and random effects techniques to analyze this relationship for Ghanaian banks. Preliminary findings contradict some prior studies by showing cash operating cycles and debtors collection periods positively relate to bank profitability, while creditors payment periods negatively relate to it. The study aims to inform bank managers and policymakers on effective working capital strategies.
Relationship between working capital management nd profitabilitySoumitra Kansabanik
A statistical study has been conducted on few companies in FMCG sector to understand the relationship between working capital management and profitability
“Working Capital Management and Firms Financial Performance of Oil Companies ...IOSRJBM
The research examined the connection amid Working Capital Management (WCM) in addition to Financial Performance of Oil companies in Nigeria. The Quasi-Experimental design was employed. The hypotheses were tested by using the Pearson Product Moment Correlation (PPMC). Data analysis results point to that of a progressive and perfectly substantial relationship amongst investing and financing rules and Return on Assets (ROA) exists; a neutral and minor relationship amid both financing and investing policies and earnings per share (EPS) exists. Furthermore, there is an insignificant but undesirable relationship amongst investing and financing rules and return on equity (ROE). Conclusively, WCM impacts performance of Nigerian firms primarily from the domain of ROA. It is recommended amongst others that the comprehensive appraisal of fiscal performance trends and WCM framework; Firms in the sector should establish adequate benchmarks of working assets components in order for emerging obligations to be met adequately.
The main objective of this paper such as the Karachi Stock Exchange market development working capital management (WCM) on firm performance is to determine the impact. In this paper the chemical industry for the period 2009-2014 to 6 years for a sample of 22 firms Karachi Stock Exchange (KSE) working capital management and firm performance of different variables used for analysis . Working Capital Management to measure the variables that were used in this study are the number of recovery days , days in inventory and size , leverage , inventory , equity , sales and gross domestic product (GDP) numbers are control variables. Firm performance measure used in this study for the dependent variable is the return on assets. Firm size is positively affected by the firm’s profits. Firms whose profits are high, their working capital firms are not interested in management and firm performance. The result of the study and working capital is negative relationship between firm performance shows. Is a positive relationship between size and profitability? Firm size is increased or decreased profit increased or decreased respectively. Moreover, profits and principles that support the pecking order used by firms are negative relationship between debts.
This paper investigates the relationship between working capital management and financial performance of Pharmaceuticals and Textile firms listed at the Dhaka Securities Exchange in Bangladesh. The data analysis was carried on ten Pharmaceuticals and Textile firms for a period of 2013 to 2017. Secondary Data was analyzed by applying Descriptive Statistics, Regression and Correlation analysis to findthe relationship of current ratio, inventory conversion period and average payment period with Return on Asset. The findings indicate that the Pharmaceuticals and Textile firms’ performance is influenced by the variables relating to working capital. There is a positive relationship between profitability and current ratioand Inventory Turnover period shows a negative relationship with profitability but Average payment period shows insignificant impact on profitability. The study concludes that there exists a relationship between working capital managementand financial performance of Pharmaceuticals and Textile firms in Bangladesh. The study recommends that for the Pharmaceuticals and Textile firms to remain profitable, they should employ working capital management practice that will help in making decisions about investment mix and policy, matching investment to objective, asset allocation for institution and balancing risk against profitability.
The document summarizes a study on working capital management of OPTCL, a power transmission company in Orissa, India. Key findings include that OPTCL had negative working capital over 2008-2011 due to current liabilities exceeding current assets. Current ratios were also unsatisfactory. Debtors were high and increasing, blocking more funds. OPTCL needs to improve working capital management by decreasing current liabilities, increasing revenue collection, and shortening average collection periods. Effective working capital management is important for organizational profitability and growth.
Financial ratio annalysis dharwad milk project report mbaBabasab Patil
This document provides an index and chapter outline for a study on the financial ratio analysis of Dharwad Milk Producers Union Limited (DMUL). The index lists 6 chapters that will analyze DMUL's industry profile, organization profile, research methodology, data analysis, findings, and conclusions. Chapter 1 provides an executive summary and outlines the objectives to study DMUL's financial performance over 5 years using ratio analysis and determine how it can improve profits by utilizing financial resources.
Working capital management and profitability an empirical analysisIAEME Publication
This document summarizes a study examining the relationship between working capital management and profitability among Indian manufacturing firms. The study uses financial data from 1,198 manufacturing firms over a 5-year period. Correlation analysis found negative relationships between measures of working capital management (debtor's days, inventory days, creditor's days, cash conversion cycle) and firm profitability. Regression analysis will further examine these relationships to determine how adjusting elements of working capital management could impact profitability. The results aim to provide Indian manufacturers insights on variables that influence their profits.
This document discusses a case study on the impact of working capital on the profitability of real estate companies over 10 years from 2004-2014. It defines working capital and working capital management, and explains their importance. It discusses the components of working capital including cash, accounts payable, inventory, and accounts receivable. It also covers ratio analysis, fund flow analysis, and working capital budgets as tools to analyze working capital and ensure adequate funding is available to meet needs. The objective is to investigate the relationship between working capital and organizational profitability.
A FINANCIAL STATEMENT USING RATIO ANALYSIS AT MAHINDRA AND MAHINDRA LTDMurali RN
Accounting serves to provide financial information to various stakeholders through three categories: financial accounting, cost accounting, and management accounting. Financial accounting records business transactions and presents financial statements including the profit and loss account and balance sheet. Cost accounting provides detailed cost information for internal management use. Management accounting assists management with planning, decision-making, and control by using techniques like budgeting, variance analysis, and ratio analysis that draw from financial and cost accounting information. It aims to optimize profit through tools and analysis of both past financial data and future projections.
An Empirical Analysis on the Nature of Relationship between Capital Structure...iosrjce
The financing decision with regard to capital structure theory of finance has been a topic of many
theories and their conflicting output for past many years. This paper aims to analyse the nature of relationship
between the capital structure of a firm and its performance. The data of 40 firms excluding financial services
firms listed on Nifty indices on National Stock Exchange is studied (The composition of 50 firms on Nifty
represents a well branch out index reflecting precisely the overall market conditions). Financial services firms
have been excluded from purview of this paper, as they are in the business of collecting money and investing in
financial assets rather than producing goods, hence follow a unique business valuation model. Further financial
services sector being one of the most sensitive sectors. This paper analyzes a period of 13 years (2001-2014)
covering the phases of a business cycle starting from boom (2001/02-2006/07), recession (2007/08-2008/09)
and then recovery (2009/10-2013/14). The complete business cycle will aid to demonstrate the results more
accurately. This paper also surveys the topical developments in the empirical capital structure research. The
data for a period of 13 years is analysed using descriptive statistics, correlation and multiple regression
techniques. For research purpose, the ratios such as debt-equity ratio, debt-asset ratio and long term debt are
taken as independent variables whereas Net Profit, Net Profit Margin, ROCE, ROE and ROA are the ratios
taken as dependent variables.
The document analyzes the working capital of Wipro Limited over three fiscal years. It defines working capital and its components. It finds that Wipro's working capital and current ratio increased each year, indicating strong liquidity. While the working capital turnover ratio decreased slightly each year, it remained positive, showing efficient use of capital. In conclusion, Wipro managed its working capital well over this period to support profitability and meet obligations.
Determinants of working capital management efficiencyAlexander Decker
This document summarizes a research study that examines the determinants of working capital management efficiency for automotive and engineering firms listed on the Karachi Stock Exchange in Pakistan. The study uses cash conversion cycle, days sales inventory, days payable outstanding, and days sales outstanding as explanatory variables to analyze quarterly panel data from 9 firms over 5 years. It also administers a questionnaire on Enterprise Resource Planning (ERP) systems. The study aims to determine the efficient factors of working capital management for these firms and investigate the relationships between working capital components and independent variables. It concludes that keeping the cash conversion cycle shortest through tight collection policies and liberal payment terms, along with efficient inventory management, can help firms keep working capital efficient.
The Effect of Capital Structure on Firm Performance: Empirical Evidence from ...inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
Working capital management of automobiles industry in haryana [www.writekraft...WriteKraft Dissertations
Writekraft Research and Publications LLP was initially formed, informally, in 2006 by a group of scholars to help fellow students. Gradually, with several dissertations, thesis and assignments receiving acclaim and a good grade, Writekraft was officially founded in 2011 Since its establishment, Writekraft Research & Publications LLP is Guiding and Mentoring PhD Scholars.
Our Mission:
To provide breakthrough research works to our clients through Perseverant efforts towards creativity and innovation”.
Vision:
Writekraft endeavours to be the leading global research and publications company that will fulfil all research needs of our clients. We will achieve this vision through:
Analyzing every customer's aims, objectives and purpose of research
Using advanced and latest tools and technique of research and analysis
Coordinating and including their own ideas and knowledge
Providing the desired inferences and results of the research
In the past decade, we have successfully assisted students from various universities in India and globally. We at Writekraft Research & Publications LLP head office in Kanpur, India are most trusted and professional Research, Writing, Guidance and Publication Service Provider for PhD. Our services meet all your PhD Admissions, Thesis Preparation and Research Paper Publication needs with highest regards for the quality you prefer.
Our Achievements:
NATIONAL AWARD FOR BEST RESEARCH PROJECT (By Hon. President APJ Abdul Kalam)
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We have PhD experts from reputed institutions/ organizations like Indian Institute of Technology (IIT), Indian Institute of Management (IIM) and many more apex education institutions in India. Our works are tailored and drafted as per your requirements and are totally unique.
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Impact of working capital on profitability of telecom sector in pakistan fina...usman nazir
This document is a thesis submitted by Usman Nazir to the National College of Business
Administration and Economics in Lahore, Pakistan in partial fulfillment of the requirements for a
Masters degree in Commerce. The thesis examines the impact of working capital management on
the profitability of the telecom sector in Pakistan using data from 2011-2015. It defines key terms
like working capital management and provides background on the telecom sector in Pakistan. The
objective is to analyze the relationship between working capital management practices and
profitability in the telecom sector.
Working Capital Management in Bajaj Allianz Life InsuranceSuresh kumar
This document appears to be a project report submitted by Suresh Kumar to the University of Pune to fulfill requirements for an MBA degree. The report evaluates working capital management at Bajaj Allianz Life Insurance. It includes an acknowledgment, declaration, index, and executive summary. The report will study concepts of working capital, analyze Bajaj Allianz's profitability, liquidity, and working capital position over five years. Secondary data sources like annual reports and interviews will be used.
Working capital management project report mbaBabasab Patil
This document provides an index and executive summary of a study on the working capital management of Bahety Chemicals & Minerals Pvt Ltd, located in Dandeli, India. The study examines the company's working capital over a five year period from 2006-2010. Key findings include that the company's working capital and profits have increased each year, and it maintains current and quick ratios above standard requirements, indicating a satisfactory level of working capital management and liquidity. The document outlines the objectives, scope, limitations and methodology of the study.
This research proposal examines the impact of working capital management on the profitability of sugar and leather companies in Pakistan from 2008-2012. The objectives are to evaluate variables that impact profitability, verify the relationship between working capital management and profitability, examine the relationship between profitability and leverage, and analyze how asset management impacts financial performance. The methodology will use secondary data from 5 companies in each sector collected annually from 2008-2012. The sources will be evaluated for suitability, reliability, adequacy and accuracy. The research structure will include an introduction, objectives, problem statement, research questions, significance, literature review, methodology and bibliography.
This document summarizes a study that investigates the influence of working capital management on the performance of small and medium enterprises (SMEs) in Pakistan from 2006 to 2012. The study uses data from various sources on SMEs to examine the relationship between return on assets (used as a proxy for profitability) and variables like accounts receivable, inventory, cash conversion cycle, and accounts payable. The results suggest that days of accounts payable has a positive association with profitability, while average collection period, inventory turnover, and cash conversion cycle have an inverse relationship with performance. Firm size and sales growth also positively influence profitability, while debt ratio negatively impacts profitability.
Working Capital Management and Bank profitability in GhanaSamuel Agyei
This document examines the relationship between working capital management practices and profitability of banks in Ghana. It reviews previous empirical studies that have mostly found efficient working capital management, like reducing cash conversion cycles and accounts receivable periods, improves firm profitability. The study uses panel data and random effects techniques to analyze this relationship for Ghanaian banks. Preliminary findings contradict some prior studies by showing cash operating cycles and debtors collection periods positively relate to bank profitability, while creditors payment periods negatively relate to it. The study aims to inform bank managers and policymakers on effective working capital strategies.
Relationship between working capital management nd profitabilitySoumitra Kansabanik
A statistical study has been conducted on few companies in FMCG sector to understand the relationship between working capital management and profitability
“Working Capital Management and Firms Financial Performance of Oil Companies ...IOSRJBM
The research examined the connection amid Working Capital Management (WCM) in addition to Financial Performance of Oil companies in Nigeria. The Quasi-Experimental design was employed. The hypotheses were tested by using the Pearson Product Moment Correlation (PPMC). Data analysis results point to that of a progressive and perfectly substantial relationship amongst investing and financing rules and Return on Assets (ROA) exists; a neutral and minor relationship amid both financing and investing policies and earnings per share (EPS) exists. Furthermore, there is an insignificant but undesirable relationship amongst investing and financing rules and return on equity (ROE). Conclusively, WCM impacts performance of Nigerian firms primarily from the domain of ROA. It is recommended amongst others that the comprehensive appraisal of fiscal performance trends and WCM framework; Firms in the sector should establish adequate benchmarks of working assets components in order for emerging obligations to be met adequately.
The main objective of this paper such as the Karachi Stock Exchange market development working capital management (WCM) on firm performance is to determine the impact. In this paper the chemical industry for the period 2009-2014 to 6 years for a sample of 22 firms Karachi Stock Exchange (KSE) working capital management and firm performance of different variables used for analysis . Working Capital Management to measure the variables that were used in this study are the number of recovery days , days in inventory and size , leverage , inventory , equity , sales and gross domestic product (GDP) numbers are control variables. Firm performance measure used in this study for the dependent variable is the return on assets. Firm size is positively affected by the firm’s profits. Firms whose profits are high, their working capital firms are not interested in management and firm performance. The result of the study and working capital is negative relationship between firm performance shows. Is a positive relationship between size and profitability? Firm size is increased or decreased profit increased or decreased respectively. Moreover, profits and principles that support the pecking order used by firms are negative relationship between debts.
This paper investigates the relationship between working capital management and financial performance of Pharmaceuticals and Textile firms listed at the Dhaka Securities Exchange in Bangladesh. The data analysis was carried on ten Pharmaceuticals and Textile firms for a period of 2013 to 2017. Secondary Data was analyzed by applying Descriptive Statistics, Regression and Correlation analysis to findthe relationship of current ratio, inventory conversion period and average payment period with Return on Asset. The findings indicate that the Pharmaceuticals and Textile firms’ performance is influenced by the variables relating to working capital. There is a positive relationship between profitability and current ratioand Inventory Turnover period shows a negative relationship with profitability but Average payment period shows insignificant impact on profitability. The study concludes that there exists a relationship between working capital managementand financial performance of Pharmaceuticals and Textile firms in Bangladesh. The study recommends that for the Pharmaceuticals and Textile firms to remain profitable, they should employ working capital management practice that will help in making decisions about investment mix and policy, matching investment to objective, asset allocation for institution and balancing risk against profitability.
The document summarizes a study on working capital management of OPTCL, a power transmission company in Orissa, India. Key findings include that OPTCL had negative working capital over 2008-2011 due to current liabilities exceeding current assets. Current ratios were also unsatisfactory. Debtors were high and increasing, blocking more funds. OPTCL needs to improve working capital management by decreasing current liabilities, increasing revenue collection, and shortening average collection periods. Effective working capital management is important for organizational profitability and growth.
Financial ratio annalysis dharwad milk project report mbaBabasab Patil
This document provides an index and chapter outline for a study on the financial ratio analysis of Dharwad Milk Producers Union Limited (DMUL). The index lists 6 chapters that will analyze DMUL's industry profile, organization profile, research methodology, data analysis, findings, and conclusions. Chapter 1 provides an executive summary and outlines the objectives to study DMUL's financial performance over 5 years using ratio analysis and determine how it can improve profits by utilizing financial resources.
Working capital management and profitability an empirical analysisIAEME Publication
This document summarizes a study examining the relationship between working capital management and profitability among Indian manufacturing firms. The study uses financial data from 1,198 manufacturing firms over a 5-year period. Correlation analysis found negative relationships between measures of working capital management (debtor's days, inventory days, creditor's days, cash conversion cycle) and firm profitability. Regression analysis will further examine these relationships to determine how adjusting elements of working capital management could impact profitability. The results aim to provide Indian manufacturers insights on variables that influence their profits.
This document discusses a case study on the impact of working capital on the profitability of real estate companies over 10 years from 2004-2014. It defines working capital and working capital management, and explains their importance. It discusses the components of working capital including cash, accounts payable, inventory, and accounts receivable. It also covers ratio analysis, fund flow analysis, and working capital budgets as tools to analyze working capital and ensure adequate funding is available to meet needs. The objective is to investigate the relationship between working capital and organizational profitability.
A FINANCIAL STATEMENT USING RATIO ANALYSIS AT MAHINDRA AND MAHINDRA LTDMurali RN
Accounting serves to provide financial information to various stakeholders through three categories: financial accounting, cost accounting, and management accounting. Financial accounting records business transactions and presents financial statements including the profit and loss account and balance sheet. Cost accounting provides detailed cost information for internal management use. Management accounting assists management with planning, decision-making, and control by using techniques like budgeting, variance analysis, and ratio analysis that draw from financial and cost accounting information. It aims to optimize profit through tools and analysis of both past financial data and future projections.
An Empirical Analysis on the Nature of Relationship between Capital Structure...iosrjce
The financing decision with regard to capital structure theory of finance has been a topic of many
theories and their conflicting output for past many years. This paper aims to analyse the nature of relationship
between the capital structure of a firm and its performance. The data of 40 firms excluding financial services
firms listed on Nifty indices on National Stock Exchange is studied (The composition of 50 firms on Nifty
represents a well branch out index reflecting precisely the overall market conditions). Financial services firms
have been excluded from purview of this paper, as they are in the business of collecting money and investing in
financial assets rather than producing goods, hence follow a unique business valuation model. Further financial
services sector being one of the most sensitive sectors. This paper analyzes a period of 13 years (2001-2014)
covering the phases of a business cycle starting from boom (2001/02-2006/07), recession (2007/08-2008/09)
and then recovery (2009/10-2013/14). The complete business cycle will aid to demonstrate the results more
accurately. This paper also surveys the topical developments in the empirical capital structure research. The
data for a period of 13 years is analysed using descriptive statistics, correlation and multiple regression
techniques. For research purpose, the ratios such as debt-equity ratio, debt-asset ratio and long term debt are
taken as independent variables whereas Net Profit, Net Profit Margin, ROCE, ROE and ROA are the ratios
taken as dependent variables.
The document analyzes the working capital of Wipro Limited over three fiscal years. It defines working capital and its components. It finds that Wipro's working capital and current ratio increased each year, indicating strong liquidity. While the working capital turnover ratio decreased slightly each year, it remained positive, showing efficient use of capital. In conclusion, Wipro managed its working capital well over this period to support profitability and meet obligations.
Determinants of working capital management efficiencyAlexander Decker
This document summarizes a research study that examines the determinants of working capital management efficiency for automotive and engineering firms listed on the Karachi Stock Exchange in Pakistan. The study uses cash conversion cycle, days sales inventory, days payable outstanding, and days sales outstanding as explanatory variables to analyze quarterly panel data from 9 firms over 5 years. It also administers a questionnaire on Enterprise Resource Planning (ERP) systems. The study aims to determine the efficient factors of working capital management for these firms and investigate the relationships between working capital components and independent variables. It concludes that keeping the cash conversion cycle shortest through tight collection policies and liberal payment terms, along with efficient inventory management, can help firms keep working capital efficient.
The Effect of Capital Structure on Firm Performance: Empirical Evidence from ...inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
Working capital management of automobiles industry in haryana [www.writekraft...WriteKraft Dissertations
Writekraft Research and Publications LLP was initially formed, informally, in 2006 by a group of scholars to help fellow students. Gradually, with several dissertations, thesis and assignments receiving acclaim and a good grade, Writekraft was officially founded in 2011 Since its establishment, Writekraft Research & Publications LLP is Guiding and Mentoring PhD Scholars.
Our Mission:
To provide breakthrough research works to our clients through Perseverant efforts towards creativity and innovation”.
Vision:
Writekraft endeavours to be the leading global research and publications company that will fulfil all research needs of our clients. We will achieve this vision through:
Analyzing every customer's aims, objectives and purpose of research
Using advanced and latest tools and technique of research and analysis
Coordinating and including their own ideas and knowledge
Providing the desired inferences and results of the research
In the past decade, we have successfully assisted students from various universities in India and globally. We at Writekraft Research & Publications LLP head office in Kanpur, India are most trusted and professional Research, Writing, Guidance and Publication Service Provider for PhD. Our services meet all your PhD Admissions, Thesis Preparation and Research Paper Publication needs with highest regards for the quality you prefer.
Our Achievements:
NATIONAL AWARD FOR BEST RESEARCH PROJECT (By Hon. President APJ Abdul Kalam)
GOLD MEDAL FOR RESEARCH ON DISABILITY (By Disabled’s Club of India)
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Impact of working capital on profitability of telecom sector in pakistan fina...usman nazir
This document is a thesis submitted by Usman Nazir to the National College of Business
Administration and Economics in Lahore, Pakistan in partial fulfillment of the requirements for a
Masters degree in Commerce. The thesis examines the impact of working capital management on
the profitability of the telecom sector in Pakistan using data from 2011-2015. It defines key terms
like working capital management and provides background on the telecom sector in Pakistan. The
objective is to analyze the relationship between working capital management practices and
profitability in the telecom sector.
Working Capital Management in Bajaj Allianz Life InsuranceSuresh kumar
This document appears to be a project report submitted by Suresh Kumar to the University of Pune to fulfill requirements for an MBA degree. The report evaluates working capital management at Bajaj Allianz Life Insurance. It includes an acknowledgment, declaration, index, and executive summary. The report will study concepts of working capital, analyze Bajaj Allianz's profitability, liquidity, and working capital position over five years. Secondary data sources like annual reports and interviews will be used.
Working capital management project report mbaBabasab Patil
This document provides an index and executive summary of a study on the working capital management of Bahety Chemicals & Minerals Pvt Ltd, located in Dandeli, India. The study examines the company's working capital over a five year period from 2006-2010. Key findings include that the company's working capital and profits have increased each year, and it maintains current and quick ratios above standard requirements, indicating a satisfactory level of working capital management and liquidity. The document outlines the objectives, scope, limitations and methodology of the study.
This document summarizes the Indian telecom equipment manufacturing industry. It outlines the history and current state, major players, equipment provided, revenues, market share, demand, and SWOT analysis. The top 13 companies are listed with the services and equipment they provide like wireless equipment, IP and packet switching, broadband equipment, and backhaul transmission equipment. Market share and revenues for 2010 and projections for 2020 are provided. Overall, it finds that India has strong growth potential in telecom equipment manufacturing due to large domestic demand, technical workforce, and management experience, but needs to improve supply chains and R&D to increase value addition.
This document provides an introduction and overview of working capital. It defines working capital as the difference between current assets and current liabilities, and represents the funds available for day-to-day operations. The document discusses the need for working capital, components of working capital like cash, receivables and inventory, and factors that influence working capital requirements like the nature of the business, credit terms, seasonality and growth. It also outlines sources of working capital including equity, debt, bank loans and trade credit, and emphasizes the importance of effective working capital management.
FACTORS HINDERING WOMEN'S ACCESS TO MICROCREDIT-BY SCARION ANATORYScarion Anatory
This document summarizes a study on factors hindering women's access to microcredit in an urban region of northern Tanzania. The study used questionnaires with women entrepreneurs (n=32) and microfinance institution workers (n=10) to identify challenges women face in economic activities, sources of capital, access to microcredit, and qualifications needed to access loans. Findings suggest high interest rates on microloans, husbands withdrawing family responsibility after wives take loans, and lack of education on using loans limit women's access to microcredit. Implications are the need for gender programs, capacity building, and economic development programs to promote equitable access to economic opportunities for women.
This document discusses women empowerment through microfinance in India. It provides background on microfinance and how it has evolved in India from subsidized credit programs to self-help groups linked to banks to today's more commercial microfinance institutions. Microfinance is seen as a tool for empowering women economically by providing small loans and other financial services. While microfinance has helped increase access to credit for many poor women, there are debates around how much it truly empowers women versus just alleviating poverty. The document also analyzes trends in women's workforce participation in India and finds it has declined significantly in rural areas in recent decades.
This document contains a list of 40 projects and working papers completed at the Indian Institute of Finance (IIF). The projects cover a wide range of topics related to finance, banking, financial management, mutual funds, stock market analysis, and company/industry analysis. Some of the projects analyze specific companies, while others take a more general look at sectors like banking, insurance, steel, etc. The list provides the titles of the projects but no further details about their scope or findings.
Working capital management is very fundamental to
the liquidity and profitability of any organization and
the two variables are vital in evaluating the
performance and ultimately deciding the survival of any
organisation. This study presents an empirical investigation of
the relationship between working capital management and
profitability using Nestle Nigeria Plc and Cadbury Nigeria Plc as case studies. The study used correlation and regression analysis to analyze data. Quick ratio was used to measure liquidity, current ratio, trade receivable collection and trade payables payment periods were used as efficiency variables to capture the working capital management policy adopted by these companies
while return on equity was used as the profitability variable.
Liquidity and efficiency variables were correlated against return on equity. The study found a negative relationship between the liquidity, two of the efficiency ratios and return on equity for Nestle Nigeria Plc while it found a positive relationship between the liquidity, efficiency ratios and return on equity of Cadbury Nigeria Plc. To enhance profitable short-term investments, the study recommends that companies should manage their working capital efficiently by upgrading the quality of their assets while
obsolete inventories should be written off.
This document is a project report submitted for a Bachelor's degree in Business Administration. It discusses a study of working capital management at Gaurav Exports, a textile company located in Panipat, Haryana, India. The report includes an introduction to the textile industry and company profile of Gaurav Exports. It describes the company's vision, mission, values, organizational structure, products, quality policy, testing facilities, training programs, sourcing, dyeing, weaving, finishing, machinery, sampling, and achievements. It also provides a SWOT analysis of the company. The objective of the report is to analyze the working capital management practices at Gaurav Exports.
Effects of profitability to capital structure of companies listed in ps eiRoeschelle Tiongson
The focus of this paper is to identify the effects of profitability to capital structure by using different ratios to different companies. The study started with the profiling of the companies according to their industry. The researchers used the listed companies from PSEi with different industries. Results provided from the computation of ratios were used to determine the effects of profitability to the capital structure of the business. This was identified through the calculations of debt ratio, debt to equity ratio, rate of return on assets, rate of return on equity and net profit margin. In this study, it was found that the net profit margin and rate of return on equity are not significantly correlated with debt to equity ratio and debt ratio while rate of return on assets are significantly correlated with debt to equity ratio. On the other hand, the rate of return on equity is also not significantly correlated with the debt ratio.
A study on working capital management at tataPINKEY GUPTA
This document summarizes a study on working capital management at Tata Steel Limited from 2011-2015. It provides background on Tata Steel and states the objectives of the study which are to understand the significance of working capital, analyze components and efficiency, and compare financial ratios to competitors. The study found that Tata Steel's net working capital fluctuated over the period but generally improved. It provides analysis of key financial ratios for Tata Steel and competitors. The study concludes that Tata Steel faced challenges from regulatory issues but remained committed to investments. Suggestions are made to improve working capital management practices.
Woman Empowerment through mushroom cultivation A Presentation By Mr Allah ...Mr.Allah Dad Khan
Woman Empowerment through mushroom cultivation A Presentation By Mr Allah Dad Khan Former Director General Agriculture Extension KPK Province and Visiting Professor the University of Agriculture Peshawar Pakistan
This document provides an overview of Hindalco Industries Ltd, an Indian aluminum and copper company. Some key points:
- Hindalco is India's largest aluminum company and one of Asia's biggest aluminum producers. It has integrated aluminum and copper production facilities across India.
- In 2007, Hindalco acquired Novelis, becoming one of the top 5 global aluminum companies. It now has operations in 13 countries across 5 continents.
- Hindalco is expanding through new greenfield projects like a 1.5 million tonne alumina refinery in Odisha and a 359,000 tonne aluminum smelter in Madhya Pradesh with a 900 MW power plant. These projects are progressing despite challenges.
The Indian media and entertainment industry grew 12.6% in 2012 to INR 821 billion and is projected to grow at a CAGR of 15.2% to reach INR 1,661 billion by 2017. Advertising spending accounted for 40% of industry revenues in 2012 at INR 327.4 billion and is expected to grow at a CAGR of 14% to INR 630 billion by 2017. The events industry in India grew 20% between 2010-2012 and is estimated to continue growing. Intellectual properties are seen as key drivers of future growth in the events industry. Emerging opportunities exist in sports, digital activations, rural areas, weddings and exhibitions. Key challenges include taxes, developing talent, obtaining sponsor
Commercial banks occupy a dominant position in the money market and form the largest component of any country's banking structure. They are the oldest, largest, and fastest growing financial institutions in India. Commercial banks play a major role in economic growth by mobilizing savings, providing short-term loans and credit, and facilitating trade and business activity through services like checking accounts and lending. They act as reservoirs that collect savings from households and allocate those funds as loans to businesses and individuals for productive investment and use.
A project report on working capital management nirani sugars ltdBabasab Patil
The document discusses working capital management at Nirani Sugars Ltd. It includes an executive summary that outlines the objectives, methodology, and scope of the study which examines the company's working capital needs, components, financing sources, and management efficiency over 5 years. Ratio analysis is used to evaluate the working capital position and overall financial performance of the company. The document also provides background information on India's sugar industry.
Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods Company. The document provides a detailed history of HUL from its inception in 1933 to 2010, including mergers, acquisitions, and expansion of its product portfolio and distribution network. It discusses HUL's presence across 20 categories, 700 million consumers in India, 39 factories, and distribution reaching over 1 million retail outlets and 6.3 million outlets. The document also notes HUL's recognition as the most respected company in India for 25 years and as one of the world's most reputed companies.
A research proposal on the Impacts of Microfinance in KenyaFred Mmbololo
This document outlines a proposed research study on microfinance awareness and impact in Nairobi County, Kenya. The study aims to determine the level of awareness of microfinance services among Nairobi residents and assess the impacts of microfinance on economic and social development. The researcher plans to survey Nairobi residents on their familiarity with local microfinance institutions and perceptions of how microfinance has affected areas like income, assets, education, and empowerment. The results could provide insight for microfinance institutions, government, and academics on the reach of services and viability of continued support for microfinance in Kenya.
Influence of Working Capital Management and Liquidity on Financial Soundness ...IOSR Journals
This particular study tries to assess the nature of relationship of Working Capital Management (WCM) and liquidity with firm’s performance. Most important issue for the firms is to decide the best suitable level of working capital which can satisfy both motives f liquidity and profitability. Financial performance is measured by return on capital employed while determinants of working capital and liquidity includes inventory turnover, accounts receivable turnover, current and quick ratio. A sample of 19 cement companies listed on Karachi Stock Exchange for a period of 2005 to 2010 has been taken out off 29 firms on the basis of availability of data. Finally outcomes of bivariate analysis suggested that efficient management of working capital and liquidity leads to financial success
Nwankwo, odi an empirical analysis of corporate survival and growth ijsaid ...William Kritsonis
The document summarizes a research paper on efficient working capital management as a prerequisite for corporate survival and growth. It discusses how working capital, consisting of current assets like cash, accounts receivable, inventory, and current liabilities, must be efficiently managed for a company to continue operating and growing over time. The researchers examined different aspects of working capital management, including inventory management, accounts receivable, cash position, and suggested measures to improve efficiency. Their findings showed that inefficient working capital management can lead to issues like excess inventory, inability to pay bills, and unproductive cash that hurts a company's survival and growth.
Nwankwo, odi an empirical analysis of corporate survival and growth ijsaid ...William Kritsonis
The document summarizes a research paper on efficient working capital management as a prerequisite for corporate survival and growth. It discusses how working capital, consisting of current assets like cash, accounts receivable, inventory, and current liabilities, must be efficiently managed for a company to continue operating and growing over time. The paper examines different aspects of working capital management, including reducing inventory levels, speeding up accounts receivable collections, and slowing payment terms for suppliers. It recommends that companies analyze factors like demand patterns and supplier lead times to optimize inventory and improve cash flow through better alignment of costs and customer payments.
Nwankwo, odi an empirical analysis of corporate survival and growth ijsaid ...William Kritsonis
NATIONAL FORUM JOURNALS (Founded 1982 (www.nationalforum.com) is a group of national and international refereed journals. NFJ publishes articles on colleges, universities and schools; management, business and administration; academic scholarship, multicultural issues; schooling; special education; counseling and addiction, international issues; education; organizational theory and behavior; educational leadership and supervision; action and applied research; teacher education; race, gender, society; public school law; philosophy and history; psychology, and much more. Dr. William Allan Kritsonis, Editor-in-Chief.
Nwankwo, odi an empirical analysis of corporate survival and growth ijsaid ...William Kritsonis
This document summarizes a research paper on efficient working capital management and its importance for corporate survival and growth. The paper examines how working capital, including current assets and current liabilities, must be efficiently managed to ensure companies can meet daily financial obligations and remain competitive. Inefficient working capital management can lead to excess inventory, inability to pay bills on time, and idle cash. The paper recommends that financial managers understand sources of working capital and opportunities to temporarily invest idle funds. When companies efficiently manage working capital, they have greater chances of long-term profitability and liquidity.
Running head business management research aryan532920
This document is a research report submitted by Allan A Lusenji to Masinde Muliro University in partial fulfillment of the requirements for a Bachelor of Commerce degree. The report examines the relationship between capital structure and financial performance of banks listed on the Nairobi Securities Exchange. It provides background information on capital structure and financial performance. It also reviews various studies that have found both positive and negative relationships between leverage/debt and profitability/performance. The report will analyze the capital structure and financial performance of banks listed in Nairobi and determine the nature of the relationship between the two factors.
Corporate governance practices and its impact on working capital management...Alexander Decker
The document summarizes a study that examined the impact of corporate governance practices on working capital management among listed manufacturing firms in Sri Lanka from 2007 to 2011. The study found that:
1) There was a significant impact of corporate governance practices on current liabilities to total assets, but not on cash conversion cycle or current assets to total assets.
2) Corporate governance practices, including board leadership structure, board size, board committees, and board meetings, were used as independent variables to measure their impact on working capital management measures like cash conversion cycle, current assets to total assets, and current liabilities to total assets.
3) Regression analysis revealed that only current liabilities to total assets were significantly influenced by corporate
Capital structure decision, importance and implementation(the case of kse)Alexander Decker
This document discusses capital structure decisions and their importance. It analyzes the determinants of capital structure for non-financial firms listed on the Karachi Stock Exchange from 1993-2002. Five explanatory variables are examined for their effect on leverage ratio, which is the ratio of total debt to total assets. Descriptive statistics show the textile industry has the highest leverage ratio on average despite negative average profitability, possibly due to underreporting of profits. Three variables were found to significantly relate to leverage ratio, while two were not statistically significant. The results support aspects of both the trade-off theory and agency theory regarding capital structure determinants.
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
This document discusses the effective management of capital structure. It begins by defining capital structure as the mix of debt and equity used to finance a firm. It then reviews several theories around optimal capital structure, including the Modigliani-Miller theory and more recent market timing theory. The document presents the methodology used, which was a qualitative analysis of secondary literature. It discusses the results, including that an optimal capital structure balances debt and equity to minimize costs. Finally, it concludes that financial performance depends on a well-structured mix of debt, preferred stock, and common equity.
This document summarizes a research study that examined the relationship between working capital management and financial performance of deposit money banks in Nigeria from 2007 to 2013. The study found a strong positive relationship between current ratio, quick ratio, and return on assets (ROA), while cash ratio was found to be inversely related to ROA. It recommends that banks maintain adequate liquidity through higher current and quick ratios to improve profitability, while reducing the amount of cash held to invest funds and generate higher returns. In general, the study empirically proved that effective working capital management can positively impact the profitability of deposit money banks in Nigeria.
Comparing Linear Accrual-Based Models in Predicting Earnings Management of Te...iosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Relationship between capital structure and firm’s performance theoretical reviewAlexander Decker
This document provides a theoretical review of the relationship between capital structure and firm performance. It begins by defining capital structure as the combination of debt and equity used to finance a firm's operations. The document then discusses the main determinants of capital structure, including both internal factors like firm size, growth, and profitability, as well as external macroeconomic variables. Finally, it outlines the major theories around capital structure and their views on the relationship with firm performance and value.
Post 1-nirupamaWorking capital ManagementCash Conversion Cycle.docxstilliegeorgiana
Post 1-nirupama
Working capital Management
Cash Conversion Cycle
Cash conversion cycle is the period it takes a company to convert its investments in inventory and other resources to cash flows from sales. The cash conversion cycle measure the time that each net input is in the production and sales process before it is turned into cash received (Cash Conversion Cycle, 2016). Cash conversion cycle depends on the time needed by the company to sell its inventory, the time taken to collect the receivables and the time taken to pay all the bills without experiencing penalties. It is a quantitative measure that is used to evaluate the efficiency of the company.
Cash Budget
It is the estimated flow of cash in and out of a business over a certain period of time. It helps in evaluating whether an item has enough cash to operate. It is created from sales and production forecast as well as the assumptions of necessary spending and accounts receivables.
Credit policy
Credit policies are a set of roles used to determine the customers who are extended credit and billed (Michalski, 2014). The credit policies provide payment rules for those who have credit while it defines the limit to set an outstanding credit account. Credit policies provide the steps and procedures for the delinquent accounts.
Inventory management
Inventory management is used mainly to specify the shape and placement of stocked goods. Inventory management is used in many sectors within an organization or in many locations of supply network to manage the regular or planned courses of production and stock of materials
Informing Decision Making
Informing decision making is important in the success of organizations especially when dealing with financial issues in the organization. Informing decision making takes place when data is used to represent or support the decisions made concerning the financial status of organizations. For instance, working capital management represents the use of informing decision making (Importance of working capital management, 2017). In this case or scenario, data is used to show the efficiency of an organization. It can be used to identify the performance of an organization. The use of data o inform business decisions serves as a means of providing evidence as to why certain decisions are made. The financial decisions of an organization require precise and straight forward information or data so as to support the business decisions. This is because for an organization to make any decisions, the financial data should be presented.
In such a scenario, informing decisions making is entirely utilized. From the time when data is collected to the time it is presented, the informing decision making is put into action because the information is used either right away or in the future to make important business decisions. Informed decisions are used to run the daily, weekly or annual business operations because they are believed to be important information (Potocan, 200 ...
This document summarizes a research paper that examines trends in working capital management and its impact on the performance of small manufacturing firms in Mauritius. It discusses how working capital management is important for business liquidity and profitability. The paper aims to analyze the relationship between working capital metrics like inventory days, receivables days, payables days, and cash conversion cycle on the profitability of 58 small manufacturing firms in Mauritius from 1998-2003. Specifically, it finds that higher investment in inventory and receivables is associated with lower profitability.
This document summarizes a research report on the relationship between working capital management and profitability. The report analyzes data from 60 Pakistani textile companies over 2001-2006. The results show a statistically significant negative relationship between profitability (measured by return on assets) and the number of days accounts receivable, inventory, and accounts payable are outstanding. Proper management of working capital through optimizing current assets and liabilities can thus improve company profits. The report also acknowledges the importance of balancing liquidity and profitability in working capital management.
Working capital management and cash holdings of banks in ghanaAlexander Decker
This document summarizes a study on the relationship between working capital management and cash holdings of banks in Ghana. The study analyzed panel data from 10 Ghanaian banks from 1999 to 2008. The results showed that longer debtor collection periods, longer cash conversion cycles, higher capital structure, and larger bank size were significantly negatively related to bank cash holdings. Meanwhile, longer creditor payment periods and higher profitability had a significantly positive relationship with bank cash holdings. The findings provide insights for bank managers and policymakers on how to effectively manage working capital to ensure adequate liquidity.
A Review Of Anatomy Of Working Capital Management Theories And The Relevant L...Rick Vogel
This document provides an overview of theories related to working capital management and establishes links between those theories and components of working capital. It first discusses key concepts in working capital management like the cash conversion cycle, receivables management, inventory management, and payables management. It then examines relevant theories that can help explain working capital management, such as agency theory, risk and return theory, resource-based theory, and cash conversion cycle theory. The document aims to address a lack of literature establishing these theoretical links. It takes a conceptual research approach to outline relationships between working capital components and applicable theories.
Confirmatory Analysis of Primary Business Function Learning For Small Industryinventionjournals
This study has the purpose to examine the unidimension construct or latent variable from Primary Business Functions Learning of Small Industries Onix and Marble in Tulungagung Region. Confirmatory Factor Analysis (CFA) is used to examine the unidimensionality of construct learning of the Primary Business Function.Important findings generated through hypothesis testing model measurement is that construct learning of the Primary Business function can be measured validly and reliably by the dimensions of Finance, Production, and MarketingLearning Experiences. These findings prove that the dimensions of Finance Learning, Production,and Marketing were credible or systemic to constructlatent variables for the Primary Business Functions. It is indicated by the regression coefficients of all the dimensions of Primary Business Functions Learning Experiences that have a value of more than 2 CR, p-value less than 0.05, and with a coefficient of three dimensions of a high standard, which is 0.968 for the Learning Financial Functions dimension, and 0.992 for the dimension of Learning Function Production, and Marketing
Similar to Effect of working capital on profitability in indian markets and concept of zero working capital (20)
2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
Seminar: Gender Board Diversity through Ownership NetworksGRAPE
Seminar on gender diversity spillovers through ownership networks at FAME|GRAPE. Presenting novel research. Studies in economics and management using econometrics methods.
Independent Study - College of Wooster Research (2023-2024) FDI, Culture, Glo...AntoniaOwensDetwiler
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
In a tight labour market, job-seekers gain bargaining power and leverage it into greater job quality—at least, that’s the conventional wisdom.
Michael, LMIC Economist, presented findings that reveal a weakened relationship between labour market tightness and job quality indicators following the pandemic. Labour market tightness coincided with growth in real wages for only a portion of workers: those in low-wage jobs requiring little education. Several factors—including labour market composition, worker and employer behaviour, and labour market practices—have contributed to the absence of worker benefits. These will be investigated further in future work.
5 Tips for Creating Standard Financial ReportsEasyReports
Well-crafted financial reports serve as vital tools for decision-making and transparency within an organization. By following the undermentioned tips, you can create standardized financial reports that effectively communicate your company's financial health and performance to stakeholders.
Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby...Donc Test
Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby, Hodge, Verified Chapters 1 - 13, Complete Newest Version Solution Manual For Financial Accounting, 8th Canadian Edition by Libby, Hodge, Verified Chapters 1 - 13, Complete Newest Version Solution Manual For Financial Accounting 8th Canadian Edition Pdf Chapters Download Stuvia Solution Manual For Financial Accounting 8th Canadian Edition Ebook Download Stuvia Solution Manual For Financial Accounting 8th Canadian Edition Pdf Solution Manual For Financial Accounting 8th Canadian Edition Pdf Download Stuvia Financial Accounting 8th Canadian Edition Pdf Chapters Download Stuvia Financial Accounting 8th Canadian Edition Ebook Download Stuvia Financial Accounting 8th Canadian Edition Pdf Financial Accounting 8th Canadian Edition Pdf Download Stuvia
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Effect of working capital on profitability in indian markets and concept of zero working capital
1. Effect of Working Capital on Profitability
And
Concept of Zero Working Capital
(Analysis for Indian Markets)
Term Paper
(Concept taken from:
The Relationship between Working Capital Management and Profitability: A Vietnam Case.
International Research Journal of Finance & Economics; 2010, Issue 49, p59-67, 9p )
2. Profitability, Working Capital
Management and Zero Working Capital
INTRODUCTION
This paper investigates the relationship between the working capital management and the
firms’ profitability for a sample of top 30 Indian companies listed on the Bombay Stock
Exchange for the period of 6 years from 2005-2010. Management of working capital is an
important component of corporate financial management because it directly affects the
profitability of the firms. Management of working capital refers to management of current
assets and of current liabilities.
Assets in commercial firm consist of two kinds: fixed assets and current assets. Fixed assets
include land, building, plant, furniture, etc. Investment in these assets represents that of part
of firm’s capital, which is permanently blocked on a permanent or fixed basis and is also called
fixed capital that generates productive capacity. The form of these assets does not change, in
the normal course. In the contrast, current assets consist of raw materials, work-in-progress,
finished goods, bills receivables, cash, bank balance, etc. These assets are bought for the
purpose of production and sales, like raw material into semi-finished products, semi- finished
products into finished products, finished products into debtors and debtors turned over cash
or bills receivables. The fixed assets are used in increasing production of an organization and
the current assets are utilized in using the fixed assets for day to day working. Therefore, the
current assets, called working capital, may be regarded as the lifeblood of a business
enterprise. It refers to that part of the firm’s capital, which is required for financing short term.
Researchers have approached working capital management in numerous ways. While some
studied the impact of proper or optimal inventory management, others studied the
management of accounts receivables trying to postulate an optimal way policy that leads to
profit maximization (Lazaridis and Tryfonidis, 2006). According to Deloof (2003), the way
that working capital is managed has a significant impact on profitability of firms. Such results
indicate that there is a certain level of working capital requirement, which potentially
maximizes returns.
Working capital management plays an important role in a firm’s profitability and risk as well as
its value (Smith, 1980). There are a lot of reasons for the importance of working capital
management. For a typical manufacturing firm, the current assets account for over half of its
total assets. For a distribution company, they account for even more. Excessive levels of
current assets can easily result in a firm’s realizing a substandard return on investment.
However, Van Horne and Wachowicz (2004) point out that excessive level of current assets
may have a negative effect of a firm’s profitability, whereas a low level of current assets may
lead to lowers of liquidity and stock-outs, resulting in difficulties in maintaining smooth
operations.
3. Efficient management of working capital plays an important role of overall corporate strategy
in order to create shareholder value. Working capital is regarded as the result of the time lag
between the expenditure for the purchase of raw material and the collection for the sale of the
finished good. The way of working capital management can have a significant impact on both
the liquidity and profitability of the company (Shin and Soenen, 1998). The main purpose of any
firm is maximum the profit. But, maintaining liquidity of the firm also is an important objective.
The problem is that increasing profits at the cost of liquidity can bring serious problems to the
firm. Thus, strategy of firm must be a balance between these two objectives of the firms.
Because the importance of profit and liquidity are the same so, one objective should not be at
cost of the other. If we ignore about profit, we cannot survive for a longer period. Conversely, if
we do not care about liquidity, we may face the problem of insolvency. For these reasons
working capital management should be given proper consideration and will ultimately affect
the profitability of the firm.
Working capital management involves planning and controlling current assets and current
liabilities in a manner that eliminates the risk of inability to meet due short term obligations on
the one hand and avoid excessive investment in these assets on the other hand( Eljelly,2004).
Lamberson (1995) showed that working capital management has become one of the most
important issues in organization, where many financial managers are finding it difficult to
identify the important drivers of working capital and the optimum level of working capital. As a
result, companies can minimize risk and improve their overall performance if they can
understand the role and determinants of working capital. A firm may choose an aggressive
working capital management policy with a low level of current assets as percentage of total
assets, or it may also be used for the financing decisions of the firm in the form of high level of
current liabilities as percentage of total liabilities (Afza and Nazir, 2009).Keeping an optimal
balance among each of the working capital components is the main objective of working
capital management. Business success heavily depends on the ability of the financial managers
to effectively manage receivables, inventory, and payables (Filbeck and Krueger, 2005). Firms
can decrease their financing costs and raise the funds available for expansion projects by
minimizing the amount of investment tied up in current assets. Lamberson (1995) indicated
that most of the financial managers’ time and efforts are consumed in identifying the non-
optimal levels of current assets and liabilities and bringing them to optimal levels. An optimal
level of working capital is a balance between risk and efficiency. It asks continuous monitoring
to maintain the optimum level of various components of working capital, such as cash
receivables, inventory and payables (Afza and Nazir, 2009). A popular measure of working
capital management is the cash conversion cycle, which is defined as the sum of days of sales
outstanding (average collection period) and days of sales in inventory less days of payables
outstanding (Keown et al, 2003). The longer this time lag, the larger the investment in working
capital. A longer cash conversion cycle might increase profitability because it leads to higher
sales. However, corporate profitability might also decrease with the cash conversion cycle, if
the costs of higher investment in working capital is higher and rises faster than the benefits of
holding more inventories and granting more inventories and trade credit to customers (Deloof,
2003).
4. Lastly, working capital management plays an important role in managerial enterprise, it may
impact to success or failure of firm in business because working capital management affect to
the profitability of the firm. The thesis is expected to contribute to better understanding of
relationship between working capital management and profitability in order to help managers
take a lot of solutions to create value for their shareholders, especially in emerging markets
like India.
LITERATURE REVIEW
The management of working capital is defined as the “management of current assets and
current liabilities, and financing these current assets.” Working capital management is
important for creating value for shareholders according to Shin and Soenen (1998).
Management of working capital was found to have a significant impact on both profitability and
liquidity in studies in different countries.
Long et al. developed a model of trade credit in which asymmetric information leads good
firms to extend trade credit so that buyers can verify product quality before payment. Their
sample contained all industrial (SIC 2000 through 3999) firms with data available from
COMPUSTAT for the three-year period ending in 1987 and used regression analysis. They
defined trade credit policy as the average time receivables are outstanding and measured this
variable by
computing each firm's days of sales outstanding (DSO), as accounts receivable per dollar of
daily sales. To reduce variability, they averaged DSO and all other measures over a three year
period. They found evidence consistent with the model. The findings suggest that producers
may increase the implicit cost of extending trade credit by financing their receivables
through payables and short-term borrowing.
Shin and Soenen(1998) researched the relationship between working capital management
and value creation for shareholders. The standard measure for working capital management is
the cash conversion cycle (CCC). Cash conversion period reflects the time span between
disbursement and collection of cash. It is measured by estimating the inventory conversion
period and the receivable Conversion period, less the payables conversion period. In their
study, Shin and Soenen(1998) used net-trade cycle (NTC) as a measure of working capital
management. NTC is basically equal to the cash conversion cycle (CCC) where all three
components are expressed as a percentage of sales. NTC may be a proxy for additional
working capital needs as a function of the projected sales growth. They examined this
relationship by using correlation and regression analysis, by industry, and working capital
intensity. Using a COMPUSTAT sample of 58,985 firm years covering the period 1975-1994,
they found a strong negative relationship between the length of the firm's net-trade cycle and
its profitability. Based on the findings, they suggest that one possible way to create
Shareholder value is to reduce firm’s NTC.
To test the relationship between working capital management and corporate profitability,
Deloof (2003) used a sample of 1,009 large Belgian non-financial firms for the 1992-1996
periods. The result from analysis showed that there was a negative between profitability
that was measured by gross operating income and cash conversion cycle as well number of
day’s
5. accounts receivable and inventories. He suggested that managers can increase corporate
profitability by reducing the number of day’s accounts receivable and inventories. Less
profitable firms waited longer to pay their bills.
Ghosh and Maji (2003) attempted to examine the efficiency of working capital management of
Indian cement companies during 1992 - 93 to 2001 - 2002. They calculated three index values -
performance index, utilization index, and overall efficiency index to measure the efficiency of
working capital management, instead of using some common working capital management
ratios. By using regression analysis and industry norms as a target efficiency level of individual
firms, Ghosh and Maji (2003) tested the speed of achieving that target level of efficiency by
individual firms during the period of study and found that some of the sample firms
successfully improved efficiency during these years.
Singh and Pandey (2008) had an attempt to study the working capital components and the
impact of working capital management on profitability of Hindalco Industries Limited for
period from 1990 to 2007. Results of the study showed that current ratio, liquid ratio,
receivables turnover ratio and working capital to total assets ratio had statistically significant
impact on the profitability of Hindalco Industries Limited.
Lazaridis and Tryfonidis (2006) conducted a cross sectional study by using a sample of 131
firms listed on the Athens Stock Exchange for the period of 2001 - 2004 and found statistically
significant relationship between profitability, measured through gross operating profit, and the
cash conversion cycle and its components (accounts receivables, accounts payables, and
inventory). Based on the results analysis of annual data by using correlation and regression
tests, they suggest that managers can create profits for their companies by correctly handling
the cash conversion cycle and by keeping each component of the conversion cycle (accounts
receivables, accounts payables, and inventory) at an optimal level.
Raheman and Nasr (2007) have selected a sample of 94 Pakistani firms listed on Karachi Stock
Exchange for a period of 6 years from 1999-2004 to study the effect of different variables of
working capital management on the net operating profitability. From result of study, they
showed that there was a negative relationship between variables of working capital
management including the average collection period, inventory turnover in days, average
collection period, cash conversion cycle and profitability. Besides, they also indicated that
size
of the firm, measured by natural logarithm of sales, and profitability had a positive relationship.
Falope and Ajilore (2009) used a sample of 50 Nigerian quoted non-financial firms for the
period 1996 -2005. Their study utilized panel data econometrics in a pooled regression, where
time-series and cross-sectional observations were combined and estimated. They found a
significant negative relationship between net operating profitability and the average collection
period, inventory turnover in days, average payment period and cash conversion cycle for a
sample of fifty Nigerian firms listed on the Nigerian Stock Exchange. Furthermore, they found
no significant variations in the effects of working capital management between large and
small firms.
6. Finally, Afza and Nazir (2009) made an attempt in order to investigate the traditional
relationship between working capital management policies and a firm’s profitability for a
sample of 204 non-financial firms listed on Karachi Stock Exchange (KSE) for the period
1998-
2005.The study found significant different among their working capital requirements and
financing policies across different industries. Moreover, regression result found a negative
relationship between the profitability of firms and degree of aggressiveness of working
capital investment and financing policies. They suggested that managers could crease value if
they adopt a conservative approach towards working capital investment and working capital
financing policies.
METHODOLOGY
Data Collection
A database was built from a selection of approximately 30 financial-reports (for the purpose of this
research, firms in financial sector, banking and finance, insurance, leasing, business service,
renting,and other service are excluded from the sample) of Bombay Stock Exchange-30 for 6 years
from 2005 to
2010. The selection was drawn from Bombay Stock Exchange [http://www.bseindia.com/about/
abindices/bse30.asp] on the basis of free float market capitalization method. The balance sheets of
the companies were taken from the ‘Capitaline’ [http://www.capitaline.com/new/index.asp].
For the purpose of this research out of top 30 BSE companies 25 were found apt for the study.
We used cross sectional yearly data in this study. Thus 25 companies yielded 150 observations
for 6 years. The data analysis has been done in two steps [Pre-Recession and Post-
Recession].The post-recession period is taken from 2008 onwards. The objective of the
research is to make a comparative study amongst the top 30 companies in pre and post-
recession. The analysis of zero working capital has also been done in both the scenarios.
The selection of the companies is done on the free float market capitalization method.Free-float
market capitalization takes into consideration only those shares issued by the company that
are readily available for trading in the market. It generally excludes promoters' holding,
government holding, strategic holding and other locked-in shares that will not come to the
market for trading in the normal course. The major advantages of free- float methodology is
that it reflects the market trends more rationally as it takes into consideration only those
shares that are available for trading in the market. It makes the index more broad-based by
reducing the concentration of top few companies in Index and aids both active and passive
investing styles. Globally, the free-float Methodology of index construction is considered to be
an
industry best practice and all major index providers like MSCI, FTSE, S&P and STOXX have
adopted the same. The MSCI India Standard Index, which is followed by Foreign Institutional
Investors (FIIs) to track Indian equities, is also based on the Free-float Methodology.
NASDAQ-
7. 100, the underlying index to the famous Exchange Traded Fund (ETF) - QQQ is based on the
Free-float Methodology.
Variables
The variables used in this study based on previous researches about the relationship
between working capital management and profitability.
Gross operating profitability that is a measure of profitability of firm is used as dependent
variable. It is defined as sales minus cost of goods sold, and divided by total assets minus
financial assets. For a number of firms in the sample, financial assets, which are chiefly shares
in affiliated firms, are a significant part of total assets. When the financial assets are main part
of total assets, its operating activities will contribute little to overall return on assets. Hence,
that
is the reason why return on assets is not considered as a measure of profitability. Number of
days accounts receivable used as proxy for the collection policy is an independent variable. It
is calculated as (accounts receivable x 365)/sales. Number of days inventories used as proxy
for the inventory policy is an independent variable. It is calculated as (inventories x 365)/ cost
of goods sold. Number of days accounts payable used as proxy for the payment policy is an
independent variable. It is calculated as (accounts payable x 365)/ cost of goods sold.
The cash conversion cycle used as a comprehensive measure of working capital management is
another independent variable. It is calculated as (number of days accounts receivable +
number of days inventory – number of days accounts payable).
Various studies have utilized the control variables along with the main variables of working
capital in order to have an opposite analysis of working capital management on the firm’s
profitability (Deloof, 2003; Lazaridis and Tryfonidis, 2006). The logarithm of sales used to
measure size of firm is a control variable. In addition, debt ratio used as proxy for leverage,
calculated by dividing total debt by total assets, and ratio of fixed financial assets to total
assets are also control variable in the regressions. According to Deloof (2003) fixed financial
assets are mainly shares in affiliated firms, intended to contribute to the activities of the firm
that holds them, by establishing a lasting and specific relation and loans that were granted
with the same purpose.
• Number of days accounts receivable (AR)= Average of accounts receivable / Sales* 365
• Number of days accounts payable (AP)= Average of accounts payable / Cost of
goods sold *365
• Number of days inventory (INV) = Average of inventory / Cost of goods sold * 365
• Cash conversion cycle (CCC) = AR+ INV- AP
• Natural Logarithm of sales (LOS) = ln(sale)
• Debt ratio (DR)= Total debt/ Total assets
• Fixed financial assets to total assets (FFAR) = Secured Loans +Unsecured Loans / Total
assets
• Gross operating profitability (GROSSPR) = ( Sales – Cost of goods sold)/ (Total assets –
Financial assets)
8. Data Analysis- Post Recession (2008-2010)
Descriptive Statistics
GROSSPR LOS CCC DR FFAR AR AP IN V
Mean 0.707068614 10.15297 7.690029 0.36495 0.379376 53.7279 198.708 116.2949
Standard deviation 0.772435624 0.89115 227.9693 0.240711 0.274829 44.94332 121.2027 216.7434
Minimum -0.8196472 8.485658 -502.96 0 0 9.515915 36.93339 0
Maximum 3.530351987 12.04457 780.8749 0.773568 1.129756 211.2627 535.7428 1080.013
Correlation Analysis- Post recession (2008-2010)
GR O S S P R L O S CCC DR FFA R AR AP IN V
GROSSPR 1 0.200821 -0.14155 0.175411 -0.23543 -0.31465 -0.02084 -0.21747
LOS 0.20082069 1 -0.14247 0.049786 -0.16878 -0.25041 -0.11312 -0.31955
CCC -0.14155456 -0.14247 1 0.067349 0.192017 0.239722 -0.22239 0.738308
DR 0.17541076 0.049786 0.067349 1 0.782423 -0.22441 0.253636 0.11557
FFAR -0.23542542 -0.16878 0.192017 0.782423 1 0.013397 0.256972 0.22589
AR -0.31464537 -0.25041 0.239722 -0.22441 0.013397 1 -0.00483 0.115348
AP -0.0208431 -0.11312 -0.22239 0.253636 0.256972 -0.00483 1 0.365828
INV -0.21746906 -0.31955 0.738308 0.11557 0.22589 0.115348 0.365828 1
Multiple Regression Analysis (2008-2010)
Model 1
GROSSPR is used a dependent variable.Cash Conversion Cycle is used as an independent
variable while Debt Ratio (DR) , Natural Logarithm of sales (LOS), Fixed Financial Assets
Ratio(FFAR) are used as control variables.
The cash conversion cycle is used popular to measure efficiency of working capital
management. From result of regression running indicates that there is a negative relationship
between cash conversion cycle and operating profitability. The coefficient is -8.3E-05 with p-
value 0.000. It is highly significant at α= 0.01. This implies that the increase or decrease in the
cash conversion cycle does not significantly affect profitability of the firm with such a low
coefficient. The adjusted R-squaredis 27% showing significant fitting of the model in post-
recession scenario.
9. SUMMARY OUTPUT
Regression Statistics
Multiple R 0.626
R Square 0.392 Goodness of Fit < 0.80
Adjusted R Square 0.270
Standard Error 0.674
Observations 25
ANOVA
df SS MS F P-value
Regression 4 5.842577 1.460644 3.219461 0.034
Residual 20 9.073843 0.453692
Total 24 14.91642 Confidence Level
0.95 0.99
Coefficien Standard t Stat P-value Lower 95%Upper 95%Lower 99%Upper 99%
Intercept 1.103556 1.656703 0.666116 0.513 -2.35227 4.559379 -3.61033 5.81744
LOS -0.04523 0.161065 -0.28085 0.782 -0.38121 0.290741 -0.50352 0.41305
CCC -8.3E-05 0.00061 -0.13641 0.893 -0.00135 0.001188 -0.00182 0.001651
DR 3.037306 0.946388 3.209368 0.004 1.063176 5.011436 0.344512 5.7301
FFAR -2.75464 0.850236 -3.23985 0.004 -4.5282 -0.98108 -5.17385 -0.33543
GROSSPR = 1.104 -0.045*LOS-(8.3E-05)*CCC +3.037*DR -2.755*FFAR
Model 2
GROSSPR is used a dependent variable. Number of days accounts receivable (AR) is used as an
independent variable while Debt Ratio (DR) , Natural Logarithm of sales (LOS), Fixed Financial
Assets Ratio(FFAR) are used as control variables.
The result of this regression indicates that the coefficient ofaccount receivable is negative with -
0.002 and p-value is 0.001. It shows highly significant at α = 0.01.This implies that the increase
or decrease in accounts receivable will significantly affect profitability of firm. Debt ratio is
used as a proxy for leverage, from analysis of regression shows that there is a positive
relationship with dependent variable. The coefficient is 2.845 and has significant at α=
0.01.This means that if there is an increase in debt ratio it will lead to increase in profitability of
firm. The result also indicates that there is a negative relationship among logarithm of sale,
fixed financial assetsto total assets and profitability. The coefficients are -0.145 and -0.633
respectively. Both of them aresignificant at α = 0.01. It implies that the size of firm has effect
on profitability of firm. The larger size leads to more profitable. The adjusted Rsquared, also
called the coefficient of multiple determinations, is the percent of the variance in the
dependent explained uniquely or jointly by the independent variables and is 28.4% showing
predicted model is highly accurate.
10. SUMMARY OUTPUT
Regression Statistics
Multiple R 0.635
R Square 0.403 Goodness of Fit < 0.80
Adjusted R Square 0.284
Standard Error 0.667
Observations 25
ANOVA
df SS MS F P-value
Regression 4 6.014731 1.503683 3.378421 0.029
Residual 20 8.901689 0.445084
Total 24 14.91642 Confidence Level
0.95 0.99
Coefficient Standard t Stat P-value Lower 95%Upper 95%Lower 99%Upper 99%
Intercept 1.3880644 1.703477 0.814842 0.425 -2.16533 4.941455 -3.45891 6.235035
ln(sale) -0.059769 0.161078 -0.37106 0.714 -0.39577 0.276233 -0.51809 0.398552
DR 2.8454771 0.986304 2.88499 0.009 0.788083 4.902871 0.039107 5.651847
FFAR -2.639849 0.854454 -3.08951 0.006 -4.42221 -0.85749 -5.07106 -0.20864
AR -0.002068 0.003247 -0.63699 0.531 -0.00884 0.004705 -0.01131 0.00717
GROSSPR = 1.388 -0.06*LOS +2.845*DR -2.64*FFAR -0.002*AR
Model 3
The dependent variable gross operating profit and the control variables are the same as the
previous models. The only difference is number of days accounts receivable variable
replaced by number of days accounts payable variable.
Looking at coefficients, we see that there is a negative relationship between number of days
accounts payable and profitability of firm. The coefficient is 0.001. It implies that the increase
or decrease in the average payment period significantly affects profitability of the firm. The
negative relationship between the average payment period and profitability indicates that the
more profitable firms wait shorter to pay their bill.The adjusted R2 is 27.0%showing significant
fitting of the model in post-recession scenario.
11. SUMMARY OUTPUT
Regression Statistics
Multiple R 0.626
R Square 0.391 Goodness of Fit < 0.80
Adjusted 0.270
Standard 0.674
Observati 25
ANOVA
df SS MS F P-value
Regressio 4 5.837249 1.459312 3.214638 0.034
Residual 20 9.07917 0.453959
Total 24 14.91642 Confidence Level
0.95 0.99
Coefficien Standard t Stat P-value Lower 95%Upper 95%Lower 99%Upper 99%
Intercept 1.117254 1.688986 0.661494 0.516 -2.40591 4.640417 -3.68848 5.922993
ln(sale) -0.04492 0.161503 -0.27813 0.784 -0.38181 0.291969 -0.50445 0.41461
DR 3.060157 0.947418 3.229997 0.004 1.083878 5.036436 0.364431 5.755883
FFAR -2.77247 0.836692 -3.31361 0.003 -4.51778 -1.02716 -5.15314 -0.3918
Ap -9.6E-05 0.001161 -0.08284 0.935 -0.00252 0.002326 -0.0034 0.003208
GROSSPR = 1.117 -0.045*LOS +3.06*DR -2.772*FFAR -(9.6E-05)*Ap
Model 4
This model is run using the number of days inventories as an independent variable as substitute
of average payment period. The other variables are same as they have been in first and second
model.
The result of regression indicates that the relationship between number of days inventories
and profitability is negative. The coefficient of this relationship is -0.00049and significant at α =
0.01.This means that if the inventory takes less time to sell, it will adversely affect
profitability.The adjusted R2 is 28.9% demonstrating the desirable superposition of
predicted and actual values.
12. SUMMARY OUTPUT
Regression Statistics
Multiple R 0.639
R Square 0.408 Goodness of Fit < 0.80
Adjusted R Square 0.289
Standard Error 0.665
Observations 25
ANOVA
df SS MS F P-value
Regression 4 6.082874 1.520718 3.443053 0.027
Residual 20 8.833546 0.441677
Total 24 14.91642 Confidence Level
0.95 0.99
Coefficien Standard t Stat P-value Lower 95%Upper 95%Lower 99%Upper 99%
Intercept 1.469101 1.70804 0.86011 0.400 -2.09381 5.032009 -3.39085 6.329054
ln(sale) -0.0778 0.164889 -0.47185 0.642 -0.42175 0.26615 -0.54697 0.391362
DR 3.040488 0.92848 3.274695 0.004 1.103713 4.977262 0.398648 5.682327
FFAR -2.69985 0.830232 -3.25192 0.004 -4.43169 -0.96802 -5.06214 -0.33756
INV PERIOD) -0.00049 0.000659 -0.75045 0.462 -0.00187 0.000879 -0.00237 0.00138
GROSSPR= 1.469 -0.078*ln(sale) +3.04*DR -2.7*FFAR 0*INV PERIOD)
Data Analysis- Pre Recession (2005-2007)
Descriptive Statistics
GROSSPR LOS CCC DR FFAR AR AP IN V
m e an 0.788228544 56.12815 198.2344 121.5334 -20.5729 0.339925 9.4331 0.341595
maximum 2.592902249 177.3841 636.4138 1168.658 1188.669 0.738432 11.46191 1.08909
Standard Deviation 0.507572269 43.31043 140.3418 236.4202 300.8036 0.241264 0.959618 0.268632
Variance 0.257629608 1875.794 19695.82 55894.51 90482.83 0.058208 0.920867 0.072163
13. Correlation Analysis- Pre recession (2005-2007)
GR O S S P R L O S CCC DR FFAR AR AP IN V
GROSSPR 1 -0.43468 0.121837 -0.05941 -0.16613 -0.18915 0.198846 -0.28271
AR -0.4346759 1 0.074751 0.553503 0.544139 0.217313 -0.67604 0.305006
AP 0.12183696 0.074751 1 -0.03903 -0.48647 0.305506 -0.07537 0.264846
INV -0.059413 0.553503 -0.03903 1 0.883868 0.415302 -0.50869 0.394123
CCC -0.1661258 0.544139 -0.48647 0.883868 1 0.215165 -0.46199 0.230116
DR -0.1891457 0.217313 0.305506 0.415302 0.215165 1 -0.30876 0.829285
LOS 0.19884624 -0.67604 -0.07537 -0.50869 -0.46199 -0.30876 1 -0.42621
FFAR -0.2827125 0.305006 0.264846 0.394123 0.230116 0.829285 -0.42621 1
Multiple Regression Analysis (2005-2007)
Model 1
GROSSPR is used a dependent variable.Cash Conversion Cycle is used as an independent
variable while Debt Ratio (DR) , Natural Logarithm of sales (LOS), Fixed Financial Assets
Ratio(FFAR) are used as control variables.
14. SUMMARY OUTPUT
Regression Statistics
Multiple R 0.315
R Square 0.100 Goodness of Fit < 0.80
Adjusted -0.101
Standard 0.532
Observati 23
ANOVA
df SS MS F P-value
Regressio 4 0.564121 0.14103 0.49739 0.738
Residual 18 5.10373 0.283541
Total 22 5.667851 Confidence Level
0.95 0.99
Coefficien Standard t Stat P-value Lower 95%Upper 95%Lower 99%Upper 99%
Intercept 0.682018 1.425708 0.478371 0.638 -2.31328 3.67732 -3.4218 4.785834
CCC -0.00016 0.000428 -0.36515 0.719 -0.00105 0.000742 -0.00139 0.001075
DR 0.306326 0.848756 0.360911 0.722 -1.47684 2.089495 -2.13677 2.749418
LOS 0.024669 0.144624 0.170572 0.866 -0.27917 0.328513 -0.39162 0.44096
FFAR -0.68453 0.799201 -0.85652 0.403 -2.36359 0.994526 -2.98498 1.61592
GROSSPR = 0.682-0.000156151*CCC +0.306*DR +0.025*ln(sale) -0.685*FFAR
The cash conversion cycle is used popular to measure efficiency of working capital
management. From result of regression running indicates that there is a negative relationship
between cash conversion cycle and operating profitability. The coefficient is -0.000156151
with p-value 0.000. It is highly significant at α= 0.01. This implies that the increase or decrease
in the cash conversion cycle does not significantly affects profitability of the firm with such a
low coefficient. The adjusted R-squaredis -10.1% showing significant non-fitting of the model in
pre- recession scenario.
Model 2
GROSSPR is used a dependent variable. Accounts Receivable Periodis used as an independent
variable while Debt Ratio (DR), Natural Logarithm of sales (LOS), Fixed Financial Assets
Ratio(FFAR) are used as control variables.
15. SUMMARY OUTPUT
Regression Statistics
Multiple R 0.504
R Square 0.254 Goodness of Fit < 0.80
Adjusted 0.088
Standard 0.485
Observati 23
ANOVA
df SS MS F P-value
Regressio 4 1.437961 0.35949 1.529785 0.236
Residual 18 4.22989 0.234994
Total 22 5.667851 Confidence Level
0.95 0.99
Coefficien Standard t Stat P-value Lower 95%Upper 95%Lower 99%Upper 99%
Intercept 2.643511 1.624431 1.627346 0.121 -0.76929 6.056313 -2.03232 7.319338
AR -0.00638 0.00324 -1.96963 0.064 -0.01319 0.000425 -0.01571 0.002944
DR 0.257103 0.769654 0.33405 0.742 -1.35988 1.874085 -1.9583 2.472505
LOS -0.14506 0.154195 -0.94076 0.359 -0.46901 0.178892 -0.5889 0.298782
FFAR -0.63273 0.726966 -0.87037 0.396 -2.16003 0.894568 -2.72526 1.459797
GROSSPR = 2.644 -0.006*AR +0.257*DR -0.145*LOS -0.633*FFAR
The result of this regression indicates that the coefficient ofaccount receivable is negative with -
0.006 and p-value is 0.001. It shows highly significant at α = 0.01.This implies that the increase
or decrease in accounts receivable will significantly affect profitability of firm. Debt ratio is
used as a proxy for leverage, from analysis of regression shows that there is apositive
relationship with dependent variable. The coefficient is 0.257 and has significant at α=
0.01.This means that if there is an increase in debt ratio it will lead to increase in profitability of
firm. The result also indicates that there is a negative relationship among logarithm of sale,
fixed financial assetsto total assets and profitability. The coefficients are -0.145 and -0.633
respectively. Both of them aresignificant at α = 0.01. It implies that the size of firm has effect
on profitability of firm. The larger size leads to more profitable. The adjusted Rsquared, also
called the coefficient of multiple determinations, is the percent of thevariance in the
dependent explained uniquely or jointly by the independent variables and is 8.8% showing
significant non-fitting of the model in pre- recession scenario.
16. Model 3
The dependent variable gross operating profit and the control variables are the same as the
previous models. The only difference is number of days accountsreceivable variable replaced
by number of days accounts payable variable.
Regression Statistics
Multiple R 0.360
R Square 0.129 Goodness of Fit < 0.80
Adjusted -0.064
Standard 0.524
Observati 23
ANOVA
df SS MS F P-value
Regressio 4 0.733709 0.183427 0.669151 0.622
Residual 18 4.934143 0.274119
Total 22 5.667851 Confidence Level
0.95 0.99
Coefficien Standard t Stat P-value Lower 95%Upper 95%Lower 99%Upper 99%
Intercept 0.413807 1.295302 0.319467 0.753 -2.30752 3.135135 -3.31464 4.142256
AP 0.000727 0.000836 0.869819 0.396 -0.00103 0.002483 -0.00168 0.003133
DR 0.164132 0.841521 0.195042 0.848 -1.60384 1.932101 -2.25814 2.586399
LOS 0.043513 0.129147 0.33693 0.740 -0.22781 0.314841 -0.32823 0.415255
FFAR -0.69077 0.785234 -0.8797 0.391 -2.34049 0.958946 -2.95102 1.569481
GROSSPR= 0.414 +0.001*AP +0.164*DR +0.044*LOS -0.691*FFAR
Looking at coefficients, we see that there is a positive relationship between number of days
accounts payable and profitability of firm. The coefficient is 0.001. It implies that the increase
or decrease in the average payment period significantly affects profitability of the firm. The
positive relationship between the average paymentperiod and profitability indicates that the
more profitable firms wait longer to pay their bill.The adjusted R2 is -6.4%showing
significant non-fitting of the model in pre-recession scenario.
Model 4
This model is run using the number of days inventories as an independent variable as
substitute of average payment period. The other variables are same as they have been in first
andsecond model.
17. SUMMARY OUTPUT
Regression Statistics
Multiple R 0.317
R Square 0.100 Goodness of Fit < 0.80
Adjusted R Square -0.100
Standard Error 0.532
Observations 23
ANOVA
df SS MS F P-value
Regression 4 0.56857 0.142143 0.50175 0.735
Residual 18 5.099281 0.283293
Total 22 5.667851 Confidence Level
0.95 0.99
Coefficien Standard t Stat P-value Lower 95%Upper 95%Lower 99%Upper 99%
Intercept 0.244345 1.450171 0.168494 0.868 -2.80235 3.291041 -3.92989 4.418575
INV 0.000227 0.000588 0.386211 0.704 -0.00101 0.001463 -0.00147 0.00192
DR 0.20162 0.868131 0.232246 0.819 -1.62226 2.025495 -2.29724 2.700483
LOS 0.071176 0.145603 0.488833 0.631 -0.23473 0.377076 -0.34793 0.490286
FFAR -0.65478 0.798929 -0.81957 0.423 -2.33326 1.023712 -2.95445 1.644894
GROSSPR = 0.244 +0*INV +0.202*DR +0.071*LOS -0.655*FFAR
The result of regression indicates that the relationship between number of days inventories
and profitability is positive. The coefficient of this relationship is 0.000227and significant at α =
0.01.This means that if the inventory takes more time to sell, it will adversely affect
profitability.The adjusted R2 is -10.0% demonstrating the poor mismatch of predicted and
actual values.
18. FINDINGS
1).Comparison of Models in Pre and Post-Recession Scenario and their accuracy
Po s t-Re ce s s i o n (2008-10) Pre -Re ce s s i o n (2005-2007)
y = 1.104 -(8.3E-05)*CCC+3.037*DR-0.045*LOS -2.755*FFAR y = 0.682-0.000156151*CCC +0.306*DR +0.025*LOS -0.685*FFAR
y = 1.388-0.002*AR+2.845*DR -0.06*LOS -2.64*FFAR y = 2.644 -0.006*AR +0.257*DR -0.145*LOS -0.633*FFAR
y = 1.117-(9.6E-05)*AP +3.06*DR-0.045*LOS -2.772*FFAR y= 0.414 +0.001*AP +0.164*DR +0.044*LOS -0.691*FFAR
y= 1.469-0.00049*I NV+3.04*DR-0.078*LOS -2.7*FFAR y = 0.244 +0.000227*I NV +0.202*DR +0.071*LOS -0.655*FFAR
y=GROSSPR y=GROSSPR
Post-Recession Post-Recession Pre-Recession Pre-Recession
R squared Adjusted R squared R squared Adjusted R squared
0.392 0.27 0.1 -0.101
0.403 0.284 0.254 0.088
0.391 0.27 0.129 -0.064
0.408 0.289 0.1 -0.1
19. 2). Zero Working Capital
Post-recession Pre-Recession
Name of Company ZWC/SALES (DEBT+INV)/CR ZWC/SALES (DEBT+INV)/CR
Bajaj Auto Limited -0.14760968 0.305006917 NA NA
Bharat Heavy Electrica 0.42632056 2.005056274 NA NA
Bharti Airtel Ltd. -0.53057015 0.14011567 -0.513717141 0.350060673
Cipla Ltd. 0.32091196 2.112357862 0.394976749 3.280783186
DLF Ltd. 0.8628121 3.476930292 1.733576758 9.929247501
Hindalco Industries Lt 0.17331781 2.84926696 0.039387942 1.125764298
Hindustan Unilever Lt -0.21374335 0.356095324 -0.226908756 0.414290102
Infosys Technologies 0.11309241 2.947323944 0.100052383 2.322943723
ITC Ltd. -0.03208585 0.876324645 -0.030100031 0.883652606
Jaiprakash Associates 0.32073783 1.818343488 0.199475522 1.793472369
Jindal Steel & Power L -0.14302859 0.559426555 -0.231194816 0.539112119
Larsen & Toubro Limit -0.15319893 0.754910487 -0.023156809 0.952462584
Mahindra & Mahindra -0.07170058 0.778542677 -0.071739129 0.790302373
Maruti Suzuki India Lt -0.10113661 0.41384391 0.005880034 1.066012686
NTPC Ltd. -0.05024592 0.785914843 -0.067983523 0.646880958
ONGC Ltd. -0.08407589 0.626334121 -0.037732679 0.777293528
Reliance Communicat -0.3068965 0.350920962 -0.351683776 0.260418519
Reliance Industries Lt -0.18848518 0.495807458 -0.155707724 0.488099774
Reliance Infrastructur -0.13243581 0.604715984 -0.122591396 0.750957986
Sterlite Industries (In -0.01913997 0.891083629 0.069588681 1.548428041
Tata Consultancy Serv 0.03870822 1.217031577 0.089716164 1.620752145
Tata Motors Ltd. -0.26378145 0.417184841 -0.105438414 0.56767143
Tata Power Company -0.0017847 0.995389468 0.02260914 1.070131198
Tata Steel Ltd. -0.07523184 0.785178178 -0.135814713 0.594773188
Wipro Ltd. 0.08404132 1.600027293 0.110405943 2.038582934
Mean -0.00700835 1.126525334 0.030082627 1.47009104
Standard deviation 0.27567901 0.91253253 0.415137223 1.982359862
Maximum 1.72562419 6.953860584 1.733576758 9.929247501
Minimum -0.53057015 0.14011567 -0.513717141 0.260418519
Range 2.25619435 6.813744914 2.247293899 9.668828982
21. Conclusions-
Let us first of all try to compare the models derived using multiple regressions and check
their verifications-
1).The first model is
GROSSPRit= B0 + B1 (CCCit) + B2 (DRit) + B3 (LOSit) + B4 (FFARit)
in pre & post - recession scenario. The coefficient of LOS( log of sales ) changes its sign from -
0.045 in post – recession to +0.025 in pre-recession model. Also, there is dramatic change in
the coefficient of CCC from a very low negative value in post-recession to a higher absolute
value in pre-recession model. This clearly demonstrates the impact on sales after recession and
cash conversion cycle. Ideally speaking, the coefficient of LOS should have been positive and
GROSSPR must increase with increase of sales (LOS). This is truly encountered before 2008 as
the coefficient is positive. But after recession the coefficient of LOS is negative clearly
demonstrating abrupt changes in market due to unexplained forcing factors in times of
recession. Our finding shows that there is a strong negative relationship between profitability,
measured through gross operating profit, and the cash conversion cycle. This means that as the
cash conversion cycle increases, it will lead to declining of profitability of firm. Therefore, the
managers can create a positive value for the shareholders by handling the adequate cash
conversion cycle and keeping each different component to an optimum level.
The most striking comparison is yielded by the R-squared values and adjusted R-squared
values. The R-squared value changes from 0.392 to 0.1 and adjusted R-squared from 0.27 to
-0.101. From the exceptionally low values of R-squared and adjusted R-squared for the pre-
recession scenario we conclude that the same model is no longer applicable for the pre-
recession
scenario which is expected in the wake of extreme fluctuations in two data sets.
2).The second model is
GROSSPRit= B0 + B1 (ARit) + B2 (DRit) + B3 (LOSit) + B4 (FFARit)
in pre & post - recession scenario. The intercept is now about twice in pre-scenario as that
of post and simultaneously the gross profitability now decreases almost 4 times rapidly in
post- recession as compared to pre-recession scenario. The sign of coefficient of LOS is
inversed to ideal behavior that is, negative. The coefficient of AR is ideal negative and is 3
times in pre- recession than post-recession. This means as accounts receivables period
increases the gross profitability decreases three times faster before recession as compared
to post-period. The most striking comparison is yielded by the R-squared values and
adjusted R-squared values.
The R-squared value changes from 0.403 to 0.254 and adjusted R-squared from 0.284 to
0.088. From the exceptionally low values of R-squared and adjusted R-squared for the pre-
recession scenario we conclude that the same model is no longer applicable for the pre-
recession scenario which is expected in the wake of extreme fluctuations in two data sets.
22. 3).The third model is
GROSSPRit= B0 + B1 (APit) + B2 (DRit) + B3 (LOSit) + B4 (FFARit)
The coefficient of LOS (log of sales) abruptly changes its sign from -0.045 in post–recession to
+0.044 in pre-recession model. At the same time the GROSSPR is increasing ideally at the
positive rate of 0.001 per unit increase of Accounts Payable Period. On the other hand, the
same decreases after recession with AP as opposed to ideal expected behavior. This clearly
demonstrates the impact on sales and accounts payable cycle after recession. The rate of
decrease of GROSSPR with FFAR has almost quadrupled after recession as expected in terms
of exponential increase in secured and unsecured loans. The most striking comparison is
yielded by the R-squared values and adjusted R-squared values. The R-squared value changes
from
0.391 to 0.129 and adjusted R-squared from 0.270 to -0.064. From the exceptionally low values
of R-squared and adjusted R-squared for the pre-recession scenario we conclude that the
same model is no longer applicable for the pre-recession scenario which is expected in the
wake of extreme fluctuations in two data sets.
4).The fourth model is
GROSSPRit= B0 + B1 (INVit) + B2 (DRit) + B3 (LOSit) + B4 (FFARit)
in pre & post - recession scenario. The coefficient of LOS( log of sales ) changes its sign from
non-ideal negative 0.078 in post – recession to +0.071 in pre-recession model. Also, there is
dramatic change in the coefficient of INV from a negative value in post-recession to a higher
positive in pre-recession model. This clearly demonstrates the impact on sales after recession
and inventory period. Ideally speaking, the coefficient of LOS should have been positive and
GROSSPR must increase with increase of sales (LOS). This is truly encountered before 2008 as
the coefficient is positive. But after recession the coefficient of LOS is negative clearly
demonstrating abrupt changes in market due to unexplained forcing factors in times of
recession. Our finding shows that there is a strong negative relationship between
profitability,
measured through gross operating profit, and the Inventory turnover period. This means that as
the Inventory turnover period increases, it will lead to increase or decrease in the
profitability of firm. The most striking comparison is yielded by the R-squared values and
adjusted R- squared values. The R-squared value changes from 0.392 to 0.1 and adjusted R-
squared from
0.27 to -0.101. From the exceptionally low values of R-squared and adjusted R-squared for
the pre-recession scenario we conclude that the same model is no longer applicable for the
pre- recession scenario which is expected in the wake of extreme fluctuations in two data
sets.
5).For perfect zero working capital ZWC/sales should be 0 and (Debtors + Inventories)/
creditors should be 1. A close look at the values mentioned in the table above yield some
useful trends in the shift of the concept of Zero Working Capital in Indian Markets.
23. The mean value of ZWC/sales is reduced to about one-fourth in post-recession scenario as
that of pre-recession scenario. Also the values deviate about its mean values about 41.5% in
pre- recession while the window of fluctuations is narrowed down to 27.5% in post-recession
scenario. The range of variation of values is still very much the same. Similar trends are
depicted for (Debtors + Inventories)/Creditors. Mean value plums to 1.12 from 1.47 after
recession, deviating from mean position about 198% before recession and about 91% after
recession. The range of variation has also been reduced by one-third.
This concludes that firms have become more critical of their operating cycle costs. Due to the
exponential fall in debtors and simultaneously accelerated increase in creditors has forced
the firms to manage their operating cycle more efficiently. They are more inclined to covering
creditors from debtors and inventories alone and are more inclined to reduce their cash
conversion cycle in the wake of low liquidity.
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DARE TO MENTION ORIGINAL SOURCE ALSO….. (the one mentioned on 1st page)