Volume : 11, Issue : 5, MAY 2025

WORKING CAPITAL PRACTICES AND PROFITABILITY IN MANUFACTURING ENTERPRISES: A FINANCIAL ANALYSIS

MEGHA GUPTA, DR. BHARTI

Abstract

Working capital management is a central concern of corporate finance because it directly affects a firm’s liquidity, operational continuity, and profitability. Manufacturing enterprises particularly require efficient management of inventories, receivables, and payables due to their long production and sales cycles. The present study examines the relationship between working capital practices and profitability using financial ratio analysis and statistical correlation. The study relies on secondary data collected from published annual reports of a leading Indian manufacturing company over a ten-year period (2014–2023). Key working capital indicators such as Current Ratio, Quick Ratio, Inventory Turnover Ratio, Debtors Turnover Ratio, Creditors Turnover Ratio, and Cash Conversion Cycle are analyzed and their relationship with profitability indicators (Return on Assets and Net Profit Margin) is examined. The findings indicate that efficient working capital management significantly influences profitability. A shorter cash conversion cycle and efficient receivable collection improve firm performance, while excessive liquidity reduces profitability. The study concludes that manufacturing firms must maintain an optimal balance between liquidity and profitability rather than maximizing either one.

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IESRJ

International Educational Scientific Research Journal

E-ISSN: 2455-295X

International Indexed Journal | Multi-Disciplinary Refereed Research Journal

ISSN: 2455-295X

Peer-Reviewed Journal - Equivalent to UGC Approved Journal

Peer-Reviewed Journal

Article No : 36

Number of Downloads : 41

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