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Analysis of effectiveness of working capital management
Review of literature on working capital management
Review of literature on working capital management
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1. Introduction
Working capital in an important component of financial management and basically Working Capital Management (WCM) has been approached in numerous ways. It focuses attention to the managing of the current assets, current liability and their relationships that exist between them. In other words, working capital management may be defined as the management of a firm’s liquid assets, cash, marketable securities, accounts receivable and inventories. In the present day context of rising capital cost and scarce funds, the importance of working capital needs special emphasis. It has been widely accepted that the profitability of a business concern depends upon the manner in which its working capital is managed. The inefficient management of working capital not only reduces profitability but ultimately may also to financial crisis.
On the other hand, proper management of working capital leads to a material savings and ensures financial returns at the optimum level even on the minimum level of capital employed. It is a known fact that both excessive and inadequate working capital is harmful for a firm. Excessive working capital leads to un-remunerative use of scarce funds. On the other hand inadequate working capital usually interrupts the normal operations of a business and impairs profitability (Soenen, 1993).. There are many instances of business failure for inadequate working capital. Further, working capital has to play a vital role to keep pace with the scientific and technological developments that are taking place in the concerned area of pharmaceutical industry. If new ideas, methods and techniques are not injected or brought into practice for want of working capital, the concern will certainly not be able to fac...
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... between the company’s size and its profitability.
H04: There is no negative relationship between debt used by cement and oil and gas companies and profitability.
Ha4: There is a negative relationship between debt used by companies and profitability.
The study is organized as follows:
Section two reviews literature on relevant theoretical and empirical work on working capital management and its effect on profitability. Section three presents the conceptual framework which includes variables and their relationship and model specification. Section four discusses sample and data collection techniques. Section five discusses data analysis and statistical results. Section six discusses findings and Section seven includes conclusions.
Works Cited
(Soenen, 1993),(Eljelly, 2004),(Rao 1989). (Soenen, 1993). (Long and Ravid, 1993; Deloof and Jegers, 1996).