International Journal of Financial Management

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Impact of Working Capital Management on Firm Profitability: A Case Study of HUL Ltd, India


Affiliations
1 Mangalam Management Studies, Ettumanoor, Kottayam, Kerala, India
2 Barkatullah University, Bhopal, Madhya Pradesh, India
     

   Subscribe/Renew Journal


The efficient management of working capital plays a crucial role in the successful functioning of a firm. Firm should always keep monitoring the liquidity position as it projects the company's credit image. Lack of liquidity can create a bad image among the parties interested in the firms functioning. Also firm must ensure that there should be a proper balance between current assets and current liabilities, as it can affect the profitability of the firm. For making the analysis of Liquidity-profitability relationship of HUL, ratio analysis techniques of Financial Management have been used.

By observation of this it can be seen that even though the profitability position was strong, the liquidity position of HUL is not up to the ideal level. The short term solvency position of the firm must be strengthened so that it is able to meet its obligations timely. These things facilitate the maximization of the wealth of the firm. From this study it can be concluded that there is no significant difference in the profitability&liquidity position of the company because it has been seen that the profitability position was strong were as the liquidity position was not satisfactory. The risk factor of the firm is high as compared to profitability. The total risk of the firm is also high as compared to the ROCE, which was not worthwhile for the future prospects of the firm.


Keywords

Liquidity, Profitability, Risk, Current Ratio, Net Working Capital, ROCE, Risk-Return Trade Off.
Subscription Login to verify subscription
User
Notifications
Font Size

  • Andrew, J. P., & Sirkin, H. L. (2003). Innovating for cash. Harvard Business School Publishing.

  • Arcelus, F. J., & Srinivasan, G. (1993). Integrating working capital decisions. The Engineering Economist, 39(1), 1-15.

  • Ball, R., Kothari, S., &Watts, R. (1993). The economic determinants of the relation between earnings, changes and stock returns. The Accounting Review, 68, 622-638.

  • Banomyong, R. (2005). Measuring the cash conversion cycle in an international supply chain. Annual Logistics Research Network (LRN) Conference Proceedings, Plymouth, UK.

  • Burgstahler, D., & Dichev, I. (1997). Earnings management to avoid earnings decreases and losses. Journal of Accounting and Economics, 24, 99-126.

  • Eljelly, A. M. A., & Abubakr, M. A. (2001). A Survey of capital budgeting techniques in pulic and private sectors of a less developed country: The Case of Sudan. Journal of African Business 2(1), 75-93

  • Solomon, E., & Pringle, J. J. (2011). An Introduction to Financial Management. University of Michigan, Goodyear Pub Co.

  • Garcia-Temel, P. J., & Martinez-Solano, P. (2007). Effects of working capital management on SME profitability. International Journal of Managerial Finance, 3(2), 164-177.

  • Gentry, J. A., Newbold, P., & Whitford, D. T. (1985). Classifying bankrupt firms with funds flow components. Journal of Accounting Research, 23(1), 146-160.

  • Gitman, L. J., Moses, E. A., & White, I. T. (1979). An assessment of corporate cash management practices. Financial Management, 8(1), 32-41.

  • Gupta, J. K. (2010). Gaining from working capital efficiency. Article in Business Standard. The Business Standard website. Retrieved from http www.businessstandard.co.in/india/news/gainingworking-capital efficiency 14048751.

  • Moss, D. J., & Stine, B. (1993). Cash Conversion cycle and firm size:A Study of Retail Firms. Managerial Finance, 19, 25-34.

  • Richards, V. D. & Laughlin, E. J. (1980). A cash conversion cycle approach to liquidity analysis. Financial Management, 9(1), 32-38.

  • Smith, K. V. (1973). State of the art of working capital management. Financial Management, 2(3), 50-55.

  • The Bombay Stock Exchange's website. Retrieved from http: www.bseindia.com/about/abindices/bse200. asp

  • Ward, M., & Cole, S. (2004). SA home loans: Bank bashing is good for business, A case study, Wits Business School, University of the Wits watersrand, Johannesburg.

  • Annual reports of HUL Ltd (2001-2002 to 2010 to 2013)

  • www.google.com

  • www.HULportal.com


Abstract Views: 532

PDF Views: 2




  • Impact of Working Capital Management on Firm Profitability: A Case Study of HUL Ltd, India

Abstract Views: 532  |  PDF Views: 2

Authors

Titto Varghese
Mangalam Management Studies, Ettumanoor, Kottayam, Kerala, India
Kamal Kishore Dhote
Barkatullah University, Bhopal, Madhya Pradesh, India

Abstract


The efficient management of working capital plays a crucial role in the successful functioning of a firm. Firm should always keep monitoring the liquidity position as it projects the company's credit image. Lack of liquidity can create a bad image among the parties interested in the firms functioning. Also firm must ensure that there should be a proper balance between current assets and current liabilities, as it can affect the profitability of the firm. For making the analysis of Liquidity-profitability relationship of HUL, ratio analysis techniques of Financial Management have been used.

By observation of this it can be seen that even though the profitability position was strong, the liquidity position of HUL is not up to the ideal level. The short term solvency position of the firm must be strengthened so that it is able to meet its obligations timely. These things facilitate the maximization of the wealth of the firm. From this study it can be concluded that there is no significant difference in the profitability&liquidity position of the company because it has been seen that the profitability position was strong were as the liquidity position was not satisfactory. The risk factor of the firm is high as compared to profitability. The total risk of the firm is also high as compared to the ROCE, which was not worthwhile for the future prospects of the firm.


Keywords


Liquidity, Profitability, Risk, Current Ratio, Net Working Capital, ROCE, Risk-Return Trade Off.

References