Effect of Working Capital Management in the Financial Performance of Select Automobile Companies in India

International Journal of Economics and Management Studies

© 2019 by SSRG - IJEMS Journal

Volume 6 Issue 10

Year of Publication : 2019

Authors : Dr. Vaddadi. Krishnamohan, Mrs. P. Uma Rajitha

10.14445/23939125/IJEMS-V6I10P115

How to Cite?

Dr. Vaddadi. Krishnamohan, Mrs. P. Uma Rajitha, "Effect of Working Capital Management in the Financial Performance of Select Automobile Companies in India," SSRG International Journal of Economics and Management Studies, vol. 6,  no. 10, pp. 112-119, 2019. Crossref, https://doi.org/10.14445/23939125/IJEMS-V6I10P115

Abstract:

Working capital management involves the relationship between short-term assets and short-term liabilities of the firm. The goal of working capital management is to ensure that the firm is able to continue its operations and that it has sufficient ability to satisfy maturing short-term debt. Considering the role and importance of working capital in the financial performance of the companies, this paper aims to measure the liquidity and solvency position of six select automobile companies located in India. If the firm desires to improve liquidity, it needs to increase the size of working capital of the firm. On the other hand, if a company is interested to obtain a greater risk for greater profits, it decreases the size of working capital in relation to its sales.
The main objective of the research paper is to measure the liquidity and solvency position of the select automobile companies in India and compare the relationship between Industry and companies of Automobile by using ratios. The study covers six Automobile companies in India, namely, Hero MotoCorp, TVS Motor, Ashok Leyland, Tata Motors, Mahindra and Mahindra and Maruti Suzuki based on the working capital management performance analysis during the period 2008-09 to 2017-2018.

Keywords:

Automobile Industry, Liquidity, working capital, Current Ratio and Quick Ratio.

References:

[1] Ramachandran, A., & Janakiraman, M. (2009), The Relationship between working capital management efficiency and EBIT. Managing Global Transitions, 7(1), Pp. 61-74.
[2] Nobanee, H. (2009), Working Capital Management and Firm‟s Profitability: An Optimal Cash Conversion Cycle, Available at SSRN: http: //ssrn.com/abstract=14123
[3] Narendre, V., Menon, S., & Shwetha, V. (2009), Factors Determining Working Capital Management in Cement Industry. South Asian Journal of Management, 15(4). Pp. 64-78.
[4] Ranjith, B.A. (2008), the Impact of Firms‟ Capital Expenditure on Working Capital Management: An Empirical Study across Industries inThailand. International Management View, 4(1), Pp. 11-24.
[5] Padachi, K. (2006), Trends in Working Capital Management and its impact on Firms Performance: An analysis of Mauritian small Manufacturing Firms. International Review of business Research Papers, 2(2). Pp. 45-58 and Education, 8(2), Pp. 37-45.
[6] Eljelly, A.M.A. (2004), Liquidity – Profitability Tradeoff: An Empirical Investigation in an Emerging Market. International Journal of commerce and Management, 14(2), Pp.48-61, http: //dx.doi.org/10.1108/105692104800001793
[7] Jarvis, R., Kitching, J., Curran, J. and Lightfoot, G. (1996), “The Financial Management of Small Firms: An Alternative Perspective “ACCA Research Report, No. 49.
[8] O‟Donnell and Milton S. Goldberge (1964). Accountants Financial Administration, New Delhi, Prentice Hall of India Private Ltd., Pp. 55.
[9] Nufazil Altaf, Farooq Ahmad Shah, (2018) "How does working capital management affect the profitability of Indian companies?” Journal of Advances in Management Research, Vol. 15 Issue: 3, pp.347-366.
[10] Dr. Navena Nesa Kumari, Dr. M. Victor Louis Anthuvan (2017),”The Impact of the Working Capital Management on the Profitability of the Leading Listed Automobile Companies in India” (2006- 2012). | Page No.: 6744-6757, Google Scholar, https://doi.org/10.18535/ijsrm/v5i8.23
[11] Working Capital Management - It‟s Impact on Liquidity and Profitability (2016) - A Study of Coal India Ltd Mr. Shivakumar, Dr. N Babitha Thimmaiah. International Journal of Research Granthaalayah ISSN- 2350-0530(O), ISSN- 2394-3629(P) ICV (Index Copernicus Value) 2015: 71.
[12] Apurba Kumar Sharma (2015)" Working Capital Management Efficiency: A study on some select Proprietary Tea Estates in Jorhat District of Assam” XVI Annual Conference Proceedings
[13] Sana N. Maswadeh (2015)"Association between the working capital management strategies and profitability". International Journal of Accounting and Financial Reporting.vol.5, No.1
[14] Muhammad mehtab azeem and akin marsap (2015) "Determinant factors and working capital requirement "International Journal of Economics and Finance: Vol.7, No.2.
[15] Hinaagha (2014) "Impact of working capital management on profitability. "European Scientific journal” , Vol.10, No. 1.
[16] Jeani, Nneka Roseline (2014)"Working Capital Management and Profitability of Listed Pharmaceutical Firms in Nigeria "Master‟s thesis Ahmadu Bello University, Zaria
[17] Lucy Wamugo Mwangi & Muathe Stephen Makau & George Kosimbei (2014) "Effects of Working Capital Management on Performance of Non-Financial Companies Listed In NSE, Kenya "European Journal of Business and Management Vol.6, No.11
[18] Wobshet Mengesha (2014) "Impact of Working Capital Management on Firms‟ Performance: The Case of Select Metal Manufacturing Companies in Addis Ababa, Ethiopia".Master‟s thesis Jimma University.