Working capital management

1. Maximizing Performance: Integrating Working Capital Management
with Financial Ratio Analysis
GUIDE:MS. SRIPRIYA SA, ASSISTANT PROFESSOR
NAME: SHAKSHI P
COLLEGE : AUXILIUM COLLEGE AUTONOMOUS

2. 2
FLOW OF CONTENT
 Introduction
 Objectives of the research work
 Results and Discussion
 Recommendations
 Conclusion

3. 3
INTRODUCTION
 Efficient working capital management ensures smooth operations and profitability by balancing short-
term assets and liabilities. Integrating it with financial ratio analysis provides comprehensive insights
into liquidity and operational efficiency. This approach identifies operational inefficiencies, such as
ineffective credit or inventory management.
 The study employs descriptive, correlation, and regression analyses on secondary data from the
company's balance sheet to examine variables such as Debtors Turnover Ratio (DTR), Creditors
Turnover Ratio (CTR), Inventory Turnover Ratio (ITR), and Working Capital Turnover Ratio
(WCTR), as well as Return on Assets (ROA) as a measure of profitability

4. OBJECTIVES OFTHE STUDY
4
 To study the various turnover ratios and its effects on profitability.
 To analyse the impact of working capital management on profitability.

5. Formulation of hypotheses
5
H1: Debtors turnover ratio (DTR) has significant impact on the performance of the firm represented by
ROA.
H2: Stock turnover ratio (STR) has significant impact on the performance of the firm represented by
ROA.
H3: Creditors turnover ratio (CTR) has significant impact on the performance of the firm represented by
ROA.
H4: Working capital turnover ratio (WCTR) has significant impact on the performance of the firm
represented by ROA

6. RESULTS AND DISCUSSION
o According to the findings, the financial ratios including Stock Turnover Ratio (STR), Debtors Turnover
Ratio (DTR), Creditors Turnover Ratio (CTR), and Working Capital Turnover Ratio (WCTR) exhibit
positive mean values, ranging from 1.64 (WCTR) to 13.91 (DTR).
20XX PRESENTATION TITLE 6
Variables N Mean Deviation
ROA 5 0.30 0.10
STR 5 1.36 0.25
DTR 5 13.91 6.81
CTR 5 5.21 2.95
WCTR 5 1.64 17.99

7. 20XX PRESENTATION TITLE 7
Model Unstandardized
Coefficients
Standardized Coefficients Collinearity Statistics
B Std.Error Beta t Sig Tolerance VIF
(Constant) 0.460 0.067 6.904 0.000
STR -0.108 0.046 -0.263 -2.365 0.021 0.898 1.114
DTR -0.006 0.002 -0.363 -2.491 0.015 0.523 1.913
CTR 0.014 0.005 0.398 3.080 0.003 0.662 1.511
WCTR 0.001 0.001 0.183 1.572 0.121 0.822 1.217
COEFFICIENTS
The test findings mentioned below are quite reliable, and the subsequent multiple regression model
used in this study as given in equation (1).
ROA = 0.460- 0.108 (STR) – 0.006 (DTR) + 0.014 (CTR) + 0.001 (WCTR) + Ci (1)

8. REGRESSIONANALYSIS MODELOUTPUT
20XX PRESENTATION TITLE 8
Model R R
Square
Adjusted
R Square
Std. Error
of the
Estimate
Change Statistics Durbin-
Watson
R Square
Change
F
Change
df1 df2 Sig. F
Chang
e
1 0.539 0.291 0.235 0.091 0.291 5.251 4 3 0.000 1.690
Only 23.50% of the fluctuations in the dependent variable in this study, or 0.235, can be attributed to
the independent variable.

9. 9
RECOMMENDATIONS
•Efficient inventory management is critical for maintaining earnings by preventing stock surpluses and shortages.
•Higher stock turnover indicates market acceptance and reduces holding expenses such as utility bills, insurance, and
security costs
•Maintaining a reasonable payable velocity ensures steady creditor levels
•Utilizing payment deadlines and discounts enhances profitability.
•Optimizing credit policies improves accounts receivable turnover, resulting in increased earnings.
.

10. 10
CONCLUSION
•Effective working capital management significantly impacts firm profitability.
•A thorough analysis of receivables, inventory, and liabilities highlights their critical role in increasing
profitability.
•Improving management of these components positively affects overall profitability.

11. THANK YOU