Inventory Management – Term Paper

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Impact Of Working Capital Management On Profitibility Of Firms EFFECT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY OF FIRMS – A study on the Indian Oil Drilling & Exploration industrY [1]Dr. Anupam Jain ABSTRACT Efficient management of working Capital is one of the pre-conditions for the success of an enterprise. Efficient management of working capital means management of various components of working capital in such a way that an adequate amount of working capital is maintained for smooth running of a firm. An optimal working capital management is expected to contribute positively to the creation of firm value.

To reach optimal working capital management firm manager should control the trade off between profitability and liquidity accurately. The purpose of this study is to investigate the relationship between working capital management and firm’s profitability. In this study, we have selected a sample of 4 Indian Oil Drilling and Exploration firms and taken their financial data for a period of 5 years from 2005 – 2009 and studied the effect of different variables of working capital management including the Cash conversion cycle and Current ratio on the profitability of the firms.

The study shows that there is a negative significant relationship between cash conversion cycle & firm profitability and positive relationship between Current Ratio & profitability of firms. This reveals that reducing cash conversion period and increasing the current ratio results into profitability increase. Thus, in purpose to create shareholder value, firm manager should concern on shorten of cash conversion cycle till accomplish optimal level. 1. Introduction

The working capital is the life-blood and nerve centre of a business firm. The importance of working capital in any industry needs no special emphasis. No business can run effectively without a sufficient quantity of working capital. It is crucial to retain right level of working capital. Working capital management is one of the most important functions of corporate… Upgrade Now This is a premium member essay. Please upgrade your account to view this essay.

Submitted by: Anupam123 Date Submitted: 07/26/2010 12:49 AM Category: Business Length: 15 pages (3,523 words) Views: 181 Rank: 4548 Report this Essay Save Paper Upgrade Now RSS ©2010 OPPapers. com Help About Us F. A. Q. Contact Us Site Stats Top Donators Top Colleges Top Visitors Popular Topics Newest Members Newest Papers Legal Terms of Service Privacy Policy Copyright Note Sitemap Saved Papers Save papers so you can find them more easily! Recent Topics Pamayanan Ng… Health Is Wealth… Essay On Character… Swot Analysis For… Terrorism Essay How Might Ethics…