Impact of Working Capital Management Policies on Corporate Performance—An Empirical Study

Sushma Vishnani and Bhupesh Kr. Shah
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Sushma Vishnani: Sushma Vishnani, FCA, Finance Faculty, Jaipuria Institute of Management, Vineet Khand, Gomtinagar, Lucknow-10. E-mail: sushma@jiml.ac.in
Bhupesh Kr. Shah: Bhupesh Kr. Shah, FCA, Partner, S. Vishnani & Co., Chartered Accountants, 11/3, Flat No. A, First Floor, Dalibagh (opp. Narmada Bhawan), Lucknow-1. E-mail: bhu790@yahoo.com

Global Business Review, 2007, vol. 8, issue 2, 267-281

Abstract: It is felt that there is the need to study the role of working capital management policies on profitability of a company. Conventionally, it has been seen that if a company desires to take a greater risk for bigger profits and losses, it reduces the size of its working capital in relation to its sales. If it is interested in improving its liquidity, it increases the level of its working capital. However, this policy is likely to result in a reduction of the sales volume, therefore of profitability. Hence, a company should strike a balance between liquidity and profitability. In this paper an effort has been made to make an empirical study of Indian Consumer Electronics Industry for assessing the impact of working capital policies & practices on profitability during the period 1994–95 to 2004–05. The impact of working capital policies on profitability has been examined by computing coefficient of correlation and regression analysis between profitability ratio and some key working capital policy indicator ratios.

Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:sae:globus:v:8:y:2007:i:2:p:267-281

DOI: 10.1177/097215090700800206

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