IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY: EMPIRICAL EVIDENCE FROM INDIAN TEXTILE INDUSTRY
Keywords:
Textile, Working Capital Management, Profitability, India, Return on Asset, Return on Equity, Cash Conversion Cycle, Correlation, RegressionAbstract
Working capital is an important part of the capital of firm which helps to carry out day to day activities. This study attempts to examine the effect of working capital on profitability in the Indian Textile Industry. Variables used in this study include Return on Assets and Return on Equity for profitability and Debtor's Collection Period (DCP), Inventory Holding Period (IHP), Creditor's Payment Period (CPP), Cash Conversion Cycle (CCC) and Current Ratio (CR) for working capital management. The data analysis was carried out for top 10 textile industries listed in National Stock Exchange of India for a period of 5 years between 2012 and 2016. The research methodology used in this study is descriptive statistics, correlation analysis and regression models. The results show that there exists a significant correlation between the profitability and working capital variables, for instance, there exists a negative correlation between Return on Assets and Debtor's Collection Period (DCP), Inventory Holding Period (IHP), Creditor's Payment Period (CPP) and Cash Conversion Cycle (CCC). Textile being one of the major sectors in India, the aim of this paper is to provide some useful recommendation to the people handling this particular department in the industry.
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