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Beyond the Balance Sheet: Dissecting the Impact of WCM on Profitability in India’s Business Arena

Author

Listed:
  • Swastika GAYEN

    (Future Institute of Technology, Kolkata, India)

  • Jaybhushan MAHALLE

    (Infonyx India Private Limited, Nagpur, India)

  • Vishwajit HARISH

    (Dayananda Sagar Academy of Technology, Bengaluru, India)

  • Taniya MALIK

    (Dr. Bhim Rao Ambedkar College, Delhi University, Delhi, India)

Abstract

This research delves into the intricate relationship between working capital management components and various profitability metrics within the Indian corporate sector. Drawing data from 600 companies, the study employs a multifaceted analytical approach, encompassing descriptive analysis, Pearson correlation and multiple regression analyses. Findings underscore the paramount significance of efficient working capital management practices. Particularly, components like days receivable and average inventory emerge as pivotal determinants of profitability metrics, such as return on equity and return on assets. Furthermore, the study identifies distinctive patterns unique to the Indian business landscape, emphasizing the need for bespoke financial strategies tailored to local market dynamics. The research not only augments the existing body of financial literature, but also offers actionable insights for practitioners aiming to optimize profitability through strategic liquidity management. As global business terrains continue to evolve, this study serves as a beacon, guiding fiscal strategies within emerging markets.

Suggested Citation

  • Swastika GAYEN & Jaybhushan MAHALLE & Vishwajit HARISH & Taniya MALIK, 2023. "Beyond the Balance Sheet: Dissecting the Impact of WCM on Profitability in India’s Business Arena," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 4(11), pages 66-76, November.
    • Handle: RePEc:ahd:journl:v:4:y:2023:i:11:p:66-76
    DOI: 10.37945/cbr.2023.11.07
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    References listed on IDEAS

    as
    1. Najib H.S. Farhan & Fozi Ali Belhaj & Waleed M. Al-ahdal & Faozi A. Almaqtari, 2021. "An analysis of working capital management in India: An urgent need to refocus," Cogent Business & Management, Taylor & Francis Journals, vol. 8(1), pages 1924930-192, January.
    2. Ahmed Mohamed Habib & Nahia Mourad, 2022. "Analyzing the Efficiency of Working Capital Management: a New Approach Based on DEA-Malmquist Technology," SN Operations Research Forum, Springer, vol. 3(3), pages 1-20, September.
    3. Halil Kiymaz & Samina Haque & Ahmed Abir Choudhury, 2023. "Working Capital Management in an International Context," World Scientific Book Chapters, in: H Kent Baker & Greg Filbeck & Tom Barkley (ed.), WORKING CAPITAL MANAGEMENT Concepts and Strategies, chapter 18, pages 387-405, World Scientific Publishing Co. Pte. Ltd..
    4. Eleonora Kontuš & Damir Mihanović, 2019. "Management of liquidity and liquid assets in small and medium-sized enterprises," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 32(1), pages 3253-3271, January.
    5. Nam, Hocheol & Uchida, Konari, 2019. "Accounts payable and firm value: International evidence," Journal of Banking & Finance, Elsevier, vol. 102(C), pages 116-137.
    6. Muhammad Yousaf & Petr Bris & David McMillan, 2021. "Effects of working capital management on firm performance: Evidence from the EFQM certified firms," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1958504-195, January.
    7. Dbouk, Wassim & Moussawi-Haidar, Lama & Jaber, Mohamad Y., 2020. "The effect of economic uncertainty on inventory and working capital for manufacturing firms," International Journal of Production Economics, Elsevier, vol. 230(C).
    8. Muhammad Yousaf & Petr Bris & Ismat Haider & David McMillan, 2021. "Working capital management and firm’s profitability: Evidence from Czech certified firms from the EFQM excellence model," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1954318-195, January.
    9. Maad A. Q. Aldubhani & Jitian Wang & Tingting Gong & Ramzi Ali Maudhah, 2022. "Impact of working capital management on profitability: evidence from listed companies in Qatar," Journal of Money and Business, Emerald Group Publishing Limited, vol. 2(1), pages 70-81, March.
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    More about this item

    Keywords

    working capital management; profitability metrics; Indian corporate sector; liquidity management;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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