Effect of Working Capital Management on Profitability: A Study of Indian Paint Industry
Working Capital Management is an important element of ﬁrms’ ﬁnancial policy and represents the balance of current assets and current liabilities. It has a crucial impact on the working, solvency and proﬁtability of the ﬁrm. Various studies have also contributed towards this theory that eﬀective working capital management has positive impact in increasing ﬁrm’s value. A ﬁrm must plan eﬀectively to maintain a healthy trade-oﬀ between liquidity and proﬁtability. The current paper endeavors to look at the eﬀect of working capital administration on the proﬁtability of the Indian paint industry. For the study, 6 companies of Indian paint industry have been selected covering a period of 10 years from 2011 – 2020. To develop a relationship model between working capital management and proﬁtability, four independent variables were used: current ratio, quick ratio, debtor turnover ratio, and inventory turnover ratio, with Return on Equity as the measure of proﬁtability acting as a dependent variable. Panel data regression and pooled Ordinary Least Square regression were used in this study. Working capital management has a signiﬁcant impact on the proﬁtability of the Indian paint industry, according to the ﬁndings of the study.
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