Working Capital Management and Operating Profit of Indian Automobile Companies

International Journal of Economics and Management Studies
© 2020 by SSRG - IJEMS Journal
Volume 7 Issue 8
Year of Publication : 2020
Authors : Dr. Ankita Rajdev
How to Cite?

Dr. Ankita Rajdev, "Working Capital Management and Operating Profit of Indian Automobile Companies," SSRG International Journal of Economics and Management Studies, vol. 7,  no. 8, pp. 80-89, 2020. Crossref,


Working Capital management is a hot topic gaining a lot of momentum in today's environment. Working capital management is an inevitable part of
finance which, if ignored, can significantly affect the profits of the companyand, in some cases, its future existence. In order to explain the relationship between working capital management and profitability, various researches have been conducted to analyze the impact of working capital on profits of the firm all across the globe. Profitability in a business context explains the ability of any business, institutions, enterprises, and corporations to earn profits. Profitability isused to determine the operating efficiency of any given business. It is important for any firm to be profitable in order to fuel its growth ambitions and, more importantly, to survive in the future. Profitability is the overall measure and indicator of the success of any enterprise.
The basic purpose of the research is to assist and develop the relationship between different variables of working capital & net operating profit and its effect on profitability ratios.The paper intends to present this in a more lucid, simple, unambiguous, and precise manner so that reader is able to evaluate its implication for the company.
The financial accounting approach to ratio analysis is used to determine the performance of the firm’sprofitability management. In addition, statistical
methods have been adopted, such as central tendency measurements, dispersion measurements, and Pearson correlation.


Working capital management, Profitability management, profits, ratio analysis, and Indian automobile sector


[1] Akinbuli, S. F., Cash management techniques and application for corporate organisation. The Nigerian Accountant Journal of the Institute of Chartered Accountants of Nigeria, 42(1)(2009)27-33.
[2] Bhunia, Amalendu Liquidity Management of Public Sector Iron & Steel Enterprise in India, Vidyasagar University Journal of Commerce, 12(2007).
[3] Lyroudi, K., & Lazaridis, Y., The cash conversion cycle and liquidity analysis of the food industry in Greece(2000).
[4] Meena,G.L., & Reddy, I.L., Effect of Working Capital on Profitability in Private Sugar Factories of Rayalaseema Region, Andhra Pradesh. SSRG International Journal of Economics and Management Studies ( SSRG – IJEMS ),3(4)(2016)1-16.
[5] Kamath, R.R., How useful are common liquidity measures?Journal of Cash Management. 9(1) (1989) 24-29.
[6] Kamath, R.R., S. Khaksari, H.H. Meier, and J. Winklepleck. Management of excess cash: practices and developments. Financial Management. 14(3) (1985) 70-77.
[7] Krishnamohan,V. & Rajitha, P., Effect of Working Capital Management in the Financial Performance of Select Automobile Companies in India. SSRG International Journal of Economics and Management Studies (SSRG-IJEMS), 6(10)(2019)112-119.
[8] Natke, P.A., The demand for liquid assets in an inflationary environment. Applied Economics. 33(2001) 427-436.
[9] Ouzidane, D., Liquidity management structures optimize working capital at Kobe Steel. Afp Exchange. 20(2) (2000) 40-44.
[10] OWOLABI, Ajao, S., OBIDA, & Small, S., Liquidity management and corporate profitability: Case study of selected manufacturing companies listed on the Nigerian stock exchange. Business Management Dynamics, 2(2)(2012) 10.
[11] Panigrahi, D., Cash conversion cycle and firms’ profitability–A study of cement manufacturing companies of India. International Journal of Current Research, 5(6) (2013) 1484-1488.
[12] Richards, V.D., and E.J. Laughlin , A cash conversion cycle approach to liquidity analysis. Financial Management. 9(1) (1980) 32.
[13] Singh, P., Inventory and Working Capital Management: An Empirical Analysis, The ICFAI University Journal of Accounting Research, 35(2008).
[14] Singh, J.P. and Pandey, S., Impact of Working Capital Management in the Profitability of Hindalco Industries Limited, The ICFAI University Journal of Financial Economics, 36(2008).
[15] Srinivasan, V., A transshipment model for cash management decisions. Management Science, 20(10)(1974) 1350-1363.
[16] Shiv Kumar S, Working Capital Management Analysis - Study of Udaipur Cement Works Ltd SSRG International Journal of Civil Engineering 3(2) (2016) 1-5.
[17] Soenen, L. A., & Aggarwal, R., Cash and foreign exchange management: theory and corporate practice in three countries, (1989).
[18] Sur, D., & Jafar, A., Efficiency of Working Capital Management in Indian Public Enterprises during the Post-liberalization Era: A Case Study of NTPC. The ICFAI Journal of Management Research, 34(2006).
[19] Teigen, L, E., Treasury management: An overview. Business Credit. 103(7) (2001) 23-24.
[20] Tse, K., A. Buckley, and W. Westerman. A survey of cash management in the Netherlands - Part 2: Liquidity management, netting, bank relationships and software systems. International Journal of Management. 15(3) (1998)280-288.
[21] Vishnani, S., & Shah, B. K., Impact of working capital management policies on corporate performance—An empirical study. Global business review, 8(2)(2007) 267-281.
[22] Weinraub, H. J., & Visscher, S., Industry practice relating to aggressive conservative working capital policies.Journal of Financial and Strategic Decision, 11(2)(1998) 11-18.
[23] Zainudin, N., Liquidity-profitability trade-off: is it evident among Malaysian SMEs?. International Journal of Management Studies (IJMS), 13(2)(2006) 107-118.