Asian Journal of Management

Ashok Kumar Panigrahi ¹

Affiliations
1 NMIMS University, Shirpur, IN

Abstract

This study empirically examines the relationship between working capital management and profitability of ACC Cement Company, the leading cement manufacturer of the country for assessing the impact of working capital management on profitability during the period 1999-2000 to 2009-10. The study is based on secondary data collected from the website moneycontrol.com as well as from the website of the company. The impact of working capital management on profitability is analyzed by computing Pearson's simple correlation coefficients, multiple correlation analysis and multiple regression analysis between Operating Profit and the selected independent variables affecting the working capital. The 't' test has been used to judge whether the computed correlation and regression coefficients are significant or not. Few variables show a strong and positive correlation with the profit whereas some others do not have. Hence, the result concludes that there is a moderate relationship between working capital management and firm's profitability. It can be said that there exists a relationship between the efficiency of working capital and the profitability, but the relationship is not statistically significant.

Keywords

Working Capital, Profitability, Efficiency, Current Assets, Current Liabilities.

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Ashok Kumar Panigrahi ¹

Affiliations
1 RITEE Business School, Raipur, IN

Abstract

Many studies on capital structure suggest that there is a positive relationship between leverage and size of the firm. Marsh (1982) finds that large firms more often choose long-term debt, while small firms choose short-term debt. Large firms may be able to take advantage of economies of scale in issuing long-term debt, and may even have bargaining power over creditors. So the cost of issuing debt and equity is negatively related to firm size. In addition, larger firms are often diversified and have more stable cash flows, and so the probability of bankruptcy for larger firms is less, relative to smaller firms. This suggests that size could be positively related with leverage. This paper is an attempt to study the relationship between firm size and capital structure decisions of Indian companies. The financing pattern of 300 Indian private sector companies, comprising of 20 different sectors for the period 1999-2000 to 2007-2008, duly grouping them on the basis of their region, size, age, and nature have been analyzed to find out whether the financing decisions varies among small, medium and large firms.

Keywords

Capital Structure, Indian Economy, Private Sector, Leverage JEL Classification: G32.

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