Working Capital Management and Firms’ Performance: An Analysis of Selected Indian Cement Companies

Asian Journal of Research in Business Economics and Management; Vol. 3, No. 9, September 2013 ISSN 2249-7307

20 Pages Posted: 18 Oct 2013 Last revised: 17 Apr 2023

See all articles by CMA(Dr.) Ashok Panigrahi

CMA(Dr.) Ashok Panigrahi

SVKM's Narsee Monjee Institute of Management Studies (NMIMS)

Anita Sharma

Maharaja Surajmal Institute

Date Written: September 30, 2013

Abstract

Prior studies on this have already proved the existence of relationship between working capital and firm’s performance. In extension to the existing literature, this study is designed to investigate the relationship between working capital management and the firm’s performance i.e. impact on profitability by taking a sample of five selected Indian cement companies for the period 2001-2010. An attempt has been made to investigate the existence of relationship between the working capital management and the profitability, average receivable period, inventory conversion period, average payment period and the cash conversion cycle which expresses the efficiency of working capital. Hypotheses were tested using multiple regression analysis and Pearson’s correlation. It was found that there is a negative significant relationship between accounts receivable period and firm’s profitability, a negative relationship between Inventory conversion period and profitability, negative significant relationship between accounts payable period and profitability but a positive relationship between firm’s cash conversion cycle and its profitability. This shows that firms are selling their inventory and collecting the receivables before they have to pay for the payables.

Keywords: Working Capital, Profitability, Efficiency, Current Assets, Current Liabilities

JEL Classification: G30, G32

Suggested Citation

Panigrahi, Ashok and Sharma, Anita, Working Capital Management and Firms’ Performance: An Analysis of Selected Indian Cement Companies (September 30, 2013). Asian Journal of Research in Business Economics and Management; Vol. 3, No. 9, September 2013 ISSN 2249-7307 , Available at SSRN: https://ssrn.com/abstract=2342085

Ashok Panigrahi (Contact Author)

SVKM's Narsee Monjee Institute of Management Studies (NMIMS) ( email )

Narsee Monjee Institute of Management Studies
Mukesh Patel Technology Park
Shirpur, MS 425405
India
8888810975 (Phone)

HOME PAGE: http://nmims.irins.org/profile/149882

Anita Sharma

Maharaja Surajmal Institute

New Dehli
India

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