Effect of Working Capital on Profitability in Private Sugar Factories of Rayalaseema Region, Andhra Pradesh

International Journal of Economics and Management Studies
© 2016 by SSRG - IJEMS Journal
Volume 3 Issue 4
Year of Publication : 2016
Authors : G.L.Meena, Dr. I. Lokanandha Reddy
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How to Cite?

G.L.Meena, Dr. I. Lokanandha Reddy, "Effect of Working Capital on Profitability in Private Sugar Factories of Rayalaseema Region, Andhra Pradesh," SSRG International Journal of Economics and Management Studies, vol. 3,  no. 4, pp. 1-16, 2016. Crossref, https://doi.org/10.14445/23939125/IJEMS-V3I4P103

Abstract:

Over the years there has been a big debate on the effect of working capital on the profitability. Few researchers argue that working capital is just an idle resource with a high cost and low benefit associated with it so, companies should follow zero working capital policy but such a policy is very risky because it reduces the liquidity and it might leads to a default. Other researchers support companies to have a working capital policy because they believe that proper management of components of working capital can balance cost and benefits of the company and it will reduce the risk of default by raising the level of liquidity. Companies can choose among three different types of working capital i.e. aggressive, conservative and moderate but their choice depends on their desire level of liquidity and risk. Researchers realize the importance of the topic and lot of research has been carried out all over the world especially in developing countries like Pakistan, India, and Taiwan etc. Hence the present study is to analyse how the working capital components will affect the profitability of private sugar factories of Rayala Seema Region, Andhra Pradesh.

Keywords:

working capital, profitability, Return on Total Assets, Cash Conversion Cycle.

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