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A Z-Score Analysis on Working Capital Management Of The Selected Listed Cement Indian Companies


Affiliations
1 Shri Jairambhai Patel Institute of Business Management and Computer Applications, Gandhinagar- 382007, India
 

Working capital refers to the management of cash requirements during the period of conversion of raw material into goods and receipts of cash from selling the goods to the customers. Working capital cycle can be comprehended as a blend of operating requirement (operating cycle) and sales requirement (cash cycle). A discriminant analysis for the period 2007 to 2010 was conducted to predict whether the selected cement companies were well-managed or poorly managed in terms of working capital (WC). Two predictor variables namely ratio of monthly net working capital to monthly operating working capital and ratio of monthly net working capital to monthly sales were used in the study. Significant mean differences were observed for all the predictors for all the years on the dependent variable. Log determinants were quite similar across the time series. Assumption of equality of covariance matrices was indicated through Box'sM. The discriminate function revealed a significant association between groups and all predictors accounted for at least 40% of between group variability. The 'jack-knife' (cross validated) classification showed that overall more than 84% were correctly classified across the time horizon. Simply the current ratio analysis on the data pertaining to the year 2004, 2005, 2006, 2011 and 2012 was performed as it was statistically not supported for the application of discriminant analysis.

Keywords

Cement Sector, Discriminant Model, Ratio Analysis, Working Capital Management, JEL Classification: C3, C32, L6, L61.
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Abstract Views: 230

PDF Views: 80




  • A Z-Score Analysis on Working Capital Management Of The Selected Listed Cement Indian Companies

Abstract Views: 230  |  PDF Views: 80

Authors

Jigna Chandrakant Trivedi
Shri Jairambhai Patel Institute of Business Management and Computer Applications, Gandhinagar- 382007, India

Abstract


Working capital refers to the management of cash requirements during the period of conversion of raw material into goods and receipts of cash from selling the goods to the customers. Working capital cycle can be comprehended as a blend of operating requirement (operating cycle) and sales requirement (cash cycle). A discriminant analysis for the period 2007 to 2010 was conducted to predict whether the selected cement companies were well-managed or poorly managed in terms of working capital (WC). Two predictor variables namely ratio of monthly net working capital to monthly operating working capital and ratio of monthly net working capital to monthly sales were used in the study. Significant mean differences were observed for all the predictors for all the years on the dependent variable. Log determinants were quite similar across the time series. Assumption of equality of covariance matrices was indicated through Box'sM. The discriminate function revealed a significant association between groups and all predictors accounted for at least 40% of between group variability. The 'jack-knife' (cross validated) classification showed that overall more than 84% were correctly classified across the time horizon. Simply the current ratio analysis on the data pertaining to the year 2004, 2005, 2006, 2011 and 2012 was performed as it was statistically not supported for the application of discriminant analysis.

Keywords


Cement Sector, Discriminant Model, Ratio Analysis, Working Capital Management, JEL Classification: C3, C32, L6, L61.

References