Working Capital Management and Profitability: Evidence from India – An Empirical Study

Abstract

Working capital refers to the firm’s investment in short term assets. The management of working capital is important to the financial health of business of all sizes. The amounts invested in working capital are often high in proportion to the total assets employed and so it is vital that these amounts are used in an efficient way. The management of working capital affects the liquidity and the profitability of the corporate firm and consequently its net worth (Smith, 1980). Working capital management therefore aims at maintaining a balance between liquidity and profitability while conducting the day to day operations of business concern. The study aims to provide empirical evidence about the effects of working capital management on profitability performance of CNX Pharmaceutical companies listed on National Stock Exchange of India. The study uses different working capital measurements for a sample population of Indian firms.