Download or read book Impact of Working Capital Management on Profitability written by rafathunnisa Syeda and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The success of any business depends on its profitability, liquidity, and solvency. Liquidity plays an important role in the successful running of a business. Many prior studies have been conducted to measure the relationship between working capital and profitability. The results showed that the high investment in inventories and receivables is associated with lower financial performance. They found a negative relationship between Return on Assets and Inventory turnover and Cash conversion cycle the present study is designed to know the direct impact of working capital on profitability by choosing the days of collection, days of payment, days inventory converts to sales and finally the cash conversion cycle. This study examines the association between the profitability and working capital using the data of 15 US trading companies for the period of 2015 to 2019. The key points in this study are firstly there exists a negative relationship between the profitability and the average collection period, the lower the average collection period higher will be the profitability, indicating that a decrease in the number of days a firm receives payment from sales affects the profitability of the firm positively. Secondly there is a highly significant positive relationship between average payment period and profitability. This implies that the longer a firm makes the payment to its creditors, the more profitable it is. Thirdly the cash conversion cycle decreases it will lead to an increase in profitability of the firm, and managers can create a positive value for the shareholders which indicates that it has been maintained. The regression analysis showed the value for the R-squared in the model is 0.584, i.e., 58.4% of the variation in the dependent variable Net Profitability is explained by the independent variables.

Download or read book Negative Working Capital and Profitability written by CMA(Dr.) Ashok Panigrahi and published by . This book was released on 2013 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt: Though there are too many researches has been conducted on the topic working capital management and its impact on profitability, but there is no major research has been done for the negative working capital and its impact on profitability. All the studies on working capital generally states that for the improvement in profitability we should manage our working capital effectively and most of the studies recommended to have good amount of working capital in the organization. All the researches on this topic conclude that the companies should avoid under-investment in working capital if they want higher profit margins. With this paper we made an attempt to study the profitability of organizations which generally operates with low or in the negative working capital zone and tried to find out whether it has any negative impact on the profitability or not. With negative working capital there can be a danger of insolvency but it is not true forever. If the company is having a good image in the market and good relation with their creditors it can get the benefit from the negative working capital also. The present study is an analysis of five top Indian cement companies' working capital and their profitability structure over a period of ten years. The result shows that though there is a positive relationship between working capital and profitability, yet it does not hold good for all the cases and that too always. We have seen companies generating good profit with a negative working capital as well as companies not able to generate good profit even with having good amount of positive working capital. However, it can be said that negative working capital indicates non-liquidity or less liquidity within the firm which is not desirable at each and every stages of business.

Download or read book The Banking Industry Guide Key Insights for Investment Professionals written by Ryan C. Fuhrmann and published by CFA Institute. This book was released on 2017 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Impact of Negative Working Capital on Liquidity and Profitability written by CMA(Dr.) Ashok Panigrahi and published by . This book was released on 2014 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: Theoretically, the ultimate objective of an effective working capital management policy is to enable a firm to strike a balance between the two core objectives of the firm, i.e. profitability and liquidity. But increasing profitability would tend to reduce firms' liquidity and too much attention on liquidity would tend to affect the profitability. No doubt, every firm tries to maximize the profitability so as to maximise the shareholder's wealth but increasing profits at the cost of liquidity might cause serious trouble to the firm and this problem might lead to financial insolvency as well. However excessive liquidity on one hand indicates the accumulation of idle funds that don't fetch any profits for the firm and on the contrary, insufficient liquidity might damage the firm's goodwill, deteriorate firm's credit ratings and that might lead the firm towards bankruptcy. A company unable to make profits might be termed as a sick company but, a company having no liquidity might cease to exist. This clearly indicates that every firm must maintain sufficient amount of working capital to preserve its liquidity. But when a company like Wal-Mart, is able to generate a good amount of profit and also able to maintain its liquidity and public image without any working capital in hand i.e. in a condition of negative working capital, can we say that the company is in the verge of bankruptcy or is it a sign of managerial efficiency? Same is the case with ACC Limited, which is the company of our study. In this paper an attempt is made to study the association between liquidity, profitability and risk of bankruptcy of ACC Ltd. for the period 2000-01 to 2009-10. We found that though the company was able to maintain the profitability because of its aggressive working capital policy, but its solvency was ultimately at a stake.

Download or read book Working Capital Management Concepts And Strategies written by H Kent Baker and published by World Scientific. This book was released on 2023-03-21 with total page 543 pages. Available in PDF, EPUB and Kindle. Book excerpt: Working capital refers to the money that a company uses to finance its daily operations. Proper management of working capital is critical to financial health and operational success. Working capital management (WCM) aims to maximize operational efficiency by maintaining a delicate balance among growth, profitability, and liquidity. WCM is a continuous responsibility focusing on a firm's day-to-day operations involving short-term assets and liabilities. By efficiently managing a firm's cash, accounts receivable, inventories, and accounts payable, managers can help maintain smooth operations and improve a company's earnings and profitability. By contrast, poor WCM could lead to a lower credit score, financial insolvency, legal troubles, liquidation of assets, and potential bankruptcy.This book provides an objective look into the dynamic world of WCM. Its coverage extends from discussing basic concepts and their applications to increasingly complex and real-world situations. The book stresses that WCM is a combination of both art and science. This volume spans the gamut from theoretical to practical while offering the right balance of detailed and user-friendly coverage. Readers can gain an in-depth understanding of this subject from experts in this field. Those who want a broad survey will benefit, as will readers looking for more in-depth presentations of specific areas within this field of study. In summary, Working Capital Management: Concepts and Strategies provides a fresh look at this intriguing but often complex subject of WCM.

Download or read book Working Capital Management Practices written by Ashok Panigrahi and published by . This book was released on 2020-03-03 with total page 150 pages. Available in PDF, EPUB and Kindle. Book excerpt: Working capital management plays a significant role in improved profitability of firms. Firms can achieve optimal management of working capital by making the trade-off between profitability and liquidity. The studies on working capital management generally states that for the improvement in profitability we should manage our working capital effectively and most of the studies recommended to have good amount of working capital in the organization. All the researches on this topic conclude that the companies should avoid under-investment in working capital if they want higher profit margins. With negative working capital there can be a danger of insolvency but it is not true forever. We have seen companies generating good profit with a negative working capital as well as companies not able to generate good profit even with having good amount of positive working capital. Hence, the question arises that having negative working capital is good for an organization or not and if a company is earning profit continuously with having negative working capital, can we say that it is a sign of managerial efficiency or there might be the chances of possible bankruptcy of the company? This book is a compilation of few selected studies on the working capital management practices of Indian corporate and in many cases the findings of these studies are not in line with the results of the previous researches in this area, which raises a question mark on the traditional styles of working capital management practices and also induces the finance managers to think whether there can be a new and better approach to working capital management practices.

Download or read book Working Capital Management written by Lorenzo Preve and published by Oxford University Press, USA. This book was released on 2010-03-31 with total page 176 pages. Available in PDF, EPUB and Kindle. Book excerpt: As soon as a firm starts operating, and especially once it starts to grow, it needs to come to a decision about how to invest funds, how much cash and inventory to maintain, how much financing to provide to customers, how to obtain the necessary funds, and how much debt to take on and in which terms--all the answers to these questions have serious consequences for a firm's cash flow and profitability. Working Capital Management is a hands-on look at the crucial decision of how to define and finance the operating investments of a business. Starting with an overview of the fundamental framework of corporate finance, the authors set out to define the central, and usually underestimated, role that working capital plays within this structure. They show not only how to prevent the losses that result from mishandling working capital, but also how to fully exploit the strategic potential that intelligent, expert management of working capital allows. The book is the first to emphasize the relevance of the interplay between the investment and finance aspects of working capital, by discussing all of the main components of a firm's operating expenses from both an investment and finance perspective. After focusing on the varying aspects and themes of working capital, such as inventory management, strategic accounting, trade credit, and short-term debt, the authors move on to identify the long-term implications and opportunities raised by this often overlooked aspect of corporate finance. Lorenzo Preve and Virginia Sarria-Allende have at last provided a resource that identifies the impact of day-to-day business decisions, uncovering an essential yet often overlooked aspect of all firms' financial situations.

Download or read book The impact of working capital management on the profitability of a manufacturing company written by Jones Jalis and published by GRIN Verlag. This book was released on 2021-02-22 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bachelor Thesis from the year 2018 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 4.5/5.0, , course: Accounting and Finance, language: English, abstract: This study aims to evaluate the impact of working capital management and its main components on the profitability of manufacturing companies having Nigeria Bottling Company as the case study. The study is restricted to manufacturing companies (Nigeria Bottling Company) and limits itself to the information in the annual report and accounts of the company under review. This study covers a period of eight (8) years (2009-2017). Three objectives, research question and hypotheses which will serve as a guide for the project writing giving the work good direction, were formulated. The Research design and study used where Ex Post-facto design and secondary source of data respectively, population of the study is the manufacturing companies represented by Nigeria Breweries Company PLC. The data collected will be analyzed using multiple regression and simple regression to establish the relationship between both variables used in the work.

Download or read book CAPITAL INVESTMENT AND FINANCING FOR BEGINNERS written by Dr. Ajay Tyagi and published by Horizon Books ( A Division of Ignited Minds Edutech P Ltd). This book was released on 2017-01-01 with total page 191 pages. Available in PDF, EPUB and Kindle. Book excerpt: A corporate speculator embraces a monetary assessment while choosing whether to put resources into substantial resources or different business. The speculator needs to guarantee that it pays close to a reasonable incentive to buy the venture and that the monetary benefit for its proprietors is augmented. The part talks about monetary assessment with regards to venture choices with an emphasis on speculation valuation and organizing and assessment procedures. Capital gave to an organization, and any value produced inside, should just be put resources into resources if esteem is made for investors—that is, the point at which the estimation of financial advantages emerging from the advantages surpasses the cost of procuring those advantages.

Download or read book Impact of Working Capital Management on Profitability in UK Manufacturing Industry written by Senthilmani Thuvarakan and published by . This book was released on 2013 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: Working capital management is given higher priorities by the corporate world. Companies which are effectively using their working capital components are likely to have competitive advantage over their competitors. The purpose of this research is to investigate the relationship between the working capital components and corporate profitability in different industries. 60 manufacturing companies, 20 construction companies and 17 telecommunication companies listed on the London stock exchange is used for this research covering the period of 2006-2011. The dependent variable, profitability is measured using gross operating income. The independent variables are receivable days. Payable days, inventory days, cash conversion cycle, debt, and size of the firm. Pearson's correlation and regression analysis to explore the relationship between the profitability and the working capital components. The results show that there is no significant relationship between the working capital components and profitability. There is a negative relationship between gearing and profitability in manufacturing firms.

Download or read book Managing Working Capital A Practical Approach written by CMA(Dr.) Ashok Panigrahi and published by . This book was released on 2015 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt: Working capital management plays a significant role in improved profitability of firms. Firms can achieve optimal management of working capital by making the trade-off between profitability and liquidity. Though there are too many researches has been conducted on the topic working capital management and its impact on profitability, but there is no major research has been done for the negative working capital and its impact on profitability. All the studies on working capital generally states that for the improvement in profitability we should manage our working capital effectively and most of the studies recommended to have good amount of working capital in the organization. All the researches on this topic conclude that the companies should avoid under-investment in working capital if they want higher profit margins. With negative working capital there can be a danger of insolvency but it is not true forever. If the company is having a good image in the market and good relation with their creditors it can get the benefit from the negative working capital also.Various studies shows that though there is a positive relationship between working capital and profitability, yet it does not hold good for all the cases and that too always. We have seen companies generating good profit with a negative working capital as well as companies not able to generate good profit even with having good amount of positive working capital. However, it can be said that negative working capital indicates non-liquidity or less liquidity within the firm which is not desirable at each and every stages of business. Hence, the question arises that having negative working capital is good for an organization or not and if a company is earning profit continuously with having negative working capital, can we say that it is a sign of managerial efficiency or there might be the chances of possible bankruptcy of the company?

Download or read book Working Capital Management and Profitability A Case Study of Andhra Pradesh Power Generation Corporation written by Syed Azhar and published by . This book was released on 2017 with total page 9 pages. Available in PDF, EPUB and Kindle. Book excerpt: Working capital management is important component of financial management. Usually it is found that short term management of capital is ignored, consequently leading to failure of businesses. Thus the study focus to make item wise analysis of each component of Gross Working capital for APGENCO using percentages and examine the impact of Working capital on profitability by using statistical tool such as Correlation analysis for the study period of 2005 to 2010. In the analysis working capital ratios such as current ratio, Liquid ratio, working capital turnover ratio, Inventory turnover ratio, receivables turnover ratio, cash turnover ratio and Return on Investment ratio has been used. The study found that Debtor share a major proportion of gross working capital and cash balances has been ignored by the company. Further WTR and DTR showed a high degree of positive correlation and CR, LR, and ITR showed a high degree of negative correlation between variables and profitability. Hence, the study of the impact of working capital ratios on profitability showed both negative and positive impact.

Download or read book The Impact of Aggressive Working Capital Management Policy on Firm s Value written by Abdullah Naqi and published by . This book was released on 2020 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: The study will examine the value of the firm and aggressive working capital management while considering the mediating effect of a firm's profitability. The study consist of 147 non-financial firms listed on the Pakistan Stock Exchange. The study period consists of years from 2009 to 2014. The finding reveals that aggressive working capital financing policy has a significant negative impact on profitability and firm value while aggressive investment policy discloses a significantly positive relationship with profitability. Profitability has a significant and positive impact on the firm's valuation therefore, profitability can mediate the relationship between the aggressive working capital management and the value of the firm. Therefore, we conclude that to enhance profitability through optimization of investment on current assets and by adding the proportion of long term financing in working capital. In the end, we have discussed some of our limitations and future research opportunities.

Download or read book Relationship of Working Capital with Liquidity Profitability and Solvency written by CMA(Dr.) Ashok Panigrahi and published by . This book was released on 2014 with total page 15 pages. Available in PDF, EPUB and Kindle. Book excerpt: Experts say that the goal of working capital management should be to enable a firm to maximize profits of its operations while meeting both short term debt and upcoming operational expenses, i.e. to preserve liquidity. But increasing profitability would tend to reduce firms' liquidity and too much attention on liquidity would tend to affect the profitability. No doubt, every firm tries to maximize the profitability by preserving the liquidity. However, increasing profits at the cost of liquidity might cause serious trouble to the firm and this problem might lead to financial insolvency as well. Thus an effective WCM would be needed to strike a balance between the two core objectives of the firm. It is essential that the firm's liquidity should be properly balanced. Because, excessive liquidity on one hand indicates the accumulation of idle funds that don't fetch any profits for the firm and on the other hand, insufficient liquidity might damage the firm's goodwill, deteriorate firm's credit standings and that might lead to forced liquidation of firm's assets. Afterwards problems like bankruptcy and insolvency might happen. To sum up, a company unable to make profits might be termed as a sick company but, a company having no liquidity might cease to exist. But when a company like Wal-Mart, is able to generate profit and maximise shareholder's wealth with negative working capital, can we say that the company is on the verge of bankruptcy or is it a sign of managerial efficiency? Same is the case with ACC Limited, which is the company of our study. This paper attempts to study the association of working capital with liquidity, profitability and risk of bankruptcy of ACC Ltd. for the period 2000-01 to 2009-10. The study found that even with having negative working capital in most of the times, the company was able to earn a good rate of return because of its aggressive working capital policy but its solvency was ultimately at a stake.

Download or read book Working Capital Management and Profitability written by Muhammad Waqas Younas and published by LAP Lambert Academic Publishing. This book was released on 2011-09 with total page 88 pages. Available in PDF, EPUB and Kindle. Book excerpt: Today's unpredictable economic conditions pose great challenges for firms that intend to: grow, make increased profits, have healthier financial condition, and to reduce any possible risks. Funds in working capital may be utilized to address these concerns. The present research study makes an endeavor to examine relationship between working capital management policies and profitability. According to results, industrial sectors are following, significantly, different approaches to manage their working capital. All sectors illustrated that a conservative working capital investment policy generate positive returns except for one sector. Moreover, adopting an aggressive financing policy leads to higher earnings in four sectors and three sectors depicted opposite results. Present study may contribute towards the existing finance literature and current study may help the financial managers and policy makers to enhance their return on assets and equity by managing a suitable working capital investment and financing policy.

Download or read book The Role of Managing Flow of Working Capital on the Business Operations and Profitability written by Giriraj Kiradoo and published by . This book was released on 2020 with total page 5 pages. Available in PDF, EPUB and Kindle. Book excerpt: Purpose - The operations of an organization are conducted through various sources of funding. The current research aims at the proper management of Working Capital in a business so that negative impact can be minimized and profitability is maximized. The management of the flow of Working Capital brings stability to business operations and success. The paper provides effective understanding about the implication of working capital on a business.Research Methodology - The books and academic papers have been analyzed and reviewed to conduct secondary research so that potential information is gained on the research topic. The research majorly focuses on carrying out qualitative data through which relationship between working capital management and profits of the business is being analysedFindings - In the concept of financial management, Working Capital plays an imperative role in managing day to day activities effectively. Capital management by the financial manager is directly linked to the increased profitability of the business. The Working Capital structure of an organization can be enhanced through a reduction in the overall inventory period and the accounts receivables.Conclusion - The report provides an in-depth understanding of the positive and negative impacts of Working Capital management in a business. It is essential to depend on short term investment opportunities so that easy conversion of cash assures the necessary flow of capital. Highly liquid firms provide trade credits and easily eradicate the phase of the financial crisis.

Download or read book Negative Working Capital and Business Sustainability A Case Study of Nestle India Limited written by CMA(Dr.) Ashok Panigrahi and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Working capital decision affects both liquidity and profitability. Excess of Investment in working capital may result in low profitability and lower investment may result in poor liquidity. Management need to trade-off between liquidity and profitability to maximize shareholders wealth. But there are instances where companies running with negative working capital earning good rates of return. Negative working capital is a reverse situation as compared to normal working capital. Negative Working capital doesn't always mean bad financial condition; it indicates that most of the day to day activities are funded by customers rather than company's own working capital. Earlier negative working capital was considered as a risk of insolvency of the organizations but at present negative working capital is a sign of managerial efficiency in a business. Keeping these views in mind, this research article explains the conceptual background of the negative working capital and how it affects profitability of the corporate. Leading FMCG Company, Nestle India Limited, is taken as a case, to analyze the negative working capital and its impact on the profitability and earning capacity of the firms. Finally, it is found that companies in which negative working capital exist, profitability is more and shareholders are getting more dividend and capital appreciation, which maximizes the shareholders' value in the long run.