REVIEW OF LITERATURE - 2

2.1 REVIEW OF LITERATURE

J P Singh and Shishir Pandey (2008) have studied on topic impact of working capital
management on profitability of Hindalco Industries Limited. This study is based on secondary
data and data are collected from annual reports of company for 17 years period i.e. 1990 -2007.
The research methodology used in this paper is ratio analysis, percentage method, correlation
coefficients and multiple regression analysis. Regression results of the study show that current
ratio, liquid ratio, receivables turnover ratio and working capital to total assets ratio have
statistically significant impact on the profitability of Hindalco Industries Limited.

Jakpar S, Tinggi M, Siang TK, Johari A, Myint KT and Sadique MS (2017) in their study on
Working Capital Management and Profitability: Evidence from Manufacturing Sector in
Malaysia, the main aim of this research is to examine the relationship between the working
capital management and firm’s profitability. Under this research paper many past studies are
used for identifying profitability of firm’s performance. Regression and Pearson correlation are
used to analyzing of working capital management on profitability. The findings also show that a
significant inverse relationship between debt ratio (leverage) and firm’s profitability in analysis
of working capital management on profitability. So it concluded that the outcomes also show that
there is a positive relationship between the size of firms and the firm’s profitability. This implies
that, when the firm size is large, the profitability of a firm will potentially increase.

Jean Bosco Nzitunga (2019) in their study focused on analysis of the Effect of Working Capital
Management Practices on Profitability in State-Owned Enterprises (SOEs). Working capital
management concerned with to maintain an optimum balance of each working capital component
thereby ensuring that firms operate with sufficient funds (cash flows) and that will help to handle
effectively for the smooth running of their long-term debt and short-term obligations and
upcoming operational expenses. The basic tools are cash management; debtor management,
creditor management and stock management are used for analyzing of profitability. The findings
of this study show that profitability is positively influenced by cash management, debtor
management, creditor management, and stock management. So, it concluded that working
capital management is essential for earning of profit in SOE (State-Owned Enterprises).
Rimsha Khalid, Tehreem Saif , Abdul Rehman Gondal and Hamza Sarfraz (2018) in their study
focused on analysis of the Effect of Working Capital Management and profitability of Electrical
machinery and apparatus sector of KSE listed companies of Pakistan. In this study say that
working capital management is an essential part of every business activity. The purpose of this
study is to find out the basic impact of working capital management on profitability and to find
out the significant relationship between Inventory turnover ratio and profitability of the firm. The
methods are used in this study like current ratio, debt to equity ratio, operating profit to debt
ratio, and inventory turnover ratios of the firms. The findings involve Results showed significant
positive results on the basis of analyzing of working capital management. It is concluded that
working capital management has positive significant impact on profitability of the firms.

Ahmed SU, Mahtab N, Islam N and Abdullah M (2017) in their study focused on analysis of the
Impact of Working Capital Management and profitability of Textile Companies of Bangladesh.
In their study of Working capital management can improve a company's earnings and
profitability through efficient use of its resources. Management of working capital includes
inventory management as well as management of accounts receivables and accounts payables. 
Generating of profit in any business sector there is need to management of short term asset and
liabilities. The researchers find the world have done a lot of work on the basis how to effectively
utilize working capital at optimum level. Similarly, in Bangladesh, textile sector has
concentrated to ensure efficient working capital management. The objective of this study is to
examine the impact of different components of working capital management on profitability of
the Bangladeshi textile companies. Current ratio, correlation analysis and regression analysis are
used for the analysis of working capital management on profitability. In this study there is
statistically significant relationship between working capital management and profitability of the
Bangladeshi textile companies. It is concluded that an effective management of working capital
have significant impact on profitability of the Bangladeshi garments companies. So, this study
state that, an efficient working capital management can increase profitability of all garments in
the textile industry of Bangladesh.

Asif Iqbala and Zhuquan Wangb (2018) this research is mainly conducted to know effect of
working capital management on profitability in the manufacturing firms of Pakistan listed on
Karachi Stock Exchange. The purpose of working capital management is to profitability and
liquidity. Statistical tools are applies to analyzing of working capital management on profitability
and firm performance in manufacturing industry Pakistan. The findings of our study suggest that
paying full attention to the cash conversion cycle has enormous effect on working capital.it
concluded that the firm’s managers can enhance the profitability of their firms by reducing the
collection period.

Jacob Akomeah, Siaw Frimpong (2019) in their study focused on analysis of the Effect of
Working Capital Management and profitability of Listed Manufacturing Companies in Ghana,
this paper say that Working capital management play an important role in the success of
businesses. The purpose of this study is to determining the effect of working capital management
on the profitability of listed manufacturing firms in Ghana. The profitability as dependent
variable was measured in terms of gross operating profit. The working capital was determined by
Accounts Receivables Period, Accounts Payables Period, Inventory Conversion Period and Cash
Conversion Cycle are used as independent variables. Moreover, current ratio used as liquidity
indicator and firm size as measured by logarithm of sales is used as control variables. The study
find that cash conversion cycle (CCC), current ratio (CR), and firm size (LOS) had a significant
positive impact on the profitability. The study concluded that manufacturing firms should adopt
efficient and effective ways of managing these components of working capital management for
earning of profitability and making of better decision making.

Dr. Ashok Kumar Panigrahi, (2012) analyses the impact of working capital management on
profitability of ACC Cement Company. The study is based on secondary data, data are collected
from the websites money control as well company websites and study periods are for 10 years
i.e. 1999-2000 to 2009-2010. The research methodology used in this paper is correlations
coefficient, multiple correlation analysis and multiple regression analysis. In this paper few
variables show a strong and positive correlation with the profit whereas some others do not have.
The results show that there is moderate relationship between the efficiency of working capital
and the profitability.

Mr. Shivakumar, Dr. N Babitha Thimmaiah (Dec.2016) analyses the impact of working capital
management on profitability of coal India ltd. The paper seeks to examine the effect of working
capital management and obtain its impact on liquidity and profitability of the firm. Liquidity and
profitability is one the most important aspect of every organization otherwise it affects the
organizational stability. Working capital management has to be done for ascertainment of
liquidity and financial position of the company. The management of working capital there is
needed to apply of such methods like correlation and spearman’s method. The correlation and
spearman’s methods are used to identification of weak correlation and negative relationship
between liquidity and profitability of the firm. The purpose of this paper is to study on working
capital management and to know liquidity position of the firm. The findings involve the liquidity
ratio helps to determining of liquidity position and It helps to determining of relationship
between liquidity and profitability.

Ramamurthy, R.Ramamoorthy, S.Fabiyola Kavitha (2017) the purpose of this study is to

examine the effect of working capital management on firm’s profitability of GOOGOLSOFT
TECHNOLOGIES. This paper is to study about Ratio Analysis. This paper mainly deals with the
financial statement of the organization. By using the important key ratios of the company with
the help of knowing the financial statement of the company and researcher can determine the
market position of the company and competitors in market, in order to predict the future of the
company. Under this study not only considered the key ratios and also considering the current
trend in the market to predict the future. The paper not only considered the revenues and recent
growth, and also the assets, companies past experiences and the rating given by the suppliers. A
personal talk with the finance department and with the business accountants has been made. This
discussion has helped a lot in the analysis of ratios. Statistical tools are used like Comparative
size balance sheet analysis and Ratio analysis. The finding involve this study helps the
organization to identify the area of the problem and suggest way to improve working capital of
the company.

MR.V. VENKATACHALAM (JUNE 2016) analyses the impact of working capital management
on profitability of Mahindra and Mahindra Private Limited. Working capital is the life blood of
organization. It is essential for business of your company as blood is essential for the operation
of your body. You and your company can not live without either blood or working capital. So,
without an adequate amount of working capital, affirm may not be successful. Working capital
management is the device of finance. It is used for day to day operation of an enterprise. It is
related manage of current asset and current liabilities. Working capital refers to the amount of
fund required to cover the cost of day to day operation of the enterprise. The purpose of this
paper is to study on working capital management and to know today’s economy that helps us to
sustainable development in the future. Statistical tools are used for studying of working capital
management like Ratio analysis and Statement of changes in working capital. The findings
involve, it helps to determining of relationship between liquidity and profitability.

Dina Korent and Silvije Orsag (2018) in their study on the purpose of evaluate working capital
management on profitability in Croatian Software Companies. Management of working capital is
very important for evaluating financial performance and future decision making. Under this
study descriptive and correlation as well as panel regression analysis, Net working capital and
company’s profitability are used for analyzing working capital in six-year period (2008-2013).
The findings show that after evaluating and analyzing of working capital management a
significant impact on profitability of Croatian Software Companies. So it concluded that an
existence of an optimal level of net working capital that balances costs and benefits and
maximizes profit ability of analyzed companies.

Prof. Ritesh Kumar Verma, Aman Agarwal (October2018) in their study on working capital
management on Profitability and Market Capitalization of the Indian Companies: A Study and
Sectorial Analysis are very important for the management of firm’s money. Therefore Working
Capital Management is the key area for sectors and companies in the economy. Objective of this
research is to find the relationship of working capital with profitability and market capitalization
of the company. Sampling method is applied to collect the secondary data collected from annual
reports of the companies which are further used for data analysis to find out the working capital,
profitability and the market capitalization of a firm. In this research, we would establish the
relation of working capital with various other factors statistically.

Ahm Yeaseen Chowdhury, Mohammad Zahedul Alam, Sabiha Sultana, and Md. Kaysher Hamid
(2018) in their study on empirically examine the relationship between working capital
management and profitability of Pharmaceutical Companies of Bangladesh for assessing the
impact of working capital management on profitability during the period2001-2015. The main
purpose of this study is to empirically test the impact of working capital management on
profitability and to find out the relationship between working capital management and
profitability in Pharmaceuticals industry of Bangladesh. Return on asset (ROA), return of equity
(ROE) and earning per share (EPS) have been used as the measures of profitability and average
collection period (ACP), average payment period (APP), inventory conversion period (ICP), cash
conversion cycle (CCC), and investment in marketable securities (INV) served as the
representatives of working capital management. The findings involve in regression analysis, at
5% significant negative relationships are observed between return on asset and average
collection period, inventory conversion period, and cash conversion cycle; return of equity and
average payment period; earning per share and average collection period and average payment
period where significant positive relationships are seen between average payment period and
return on asset; and cash conversion cycle and return of equity. Therefore, this research
concludes that efficient working capital management is critical for the profitability of firms and
firms decision making.

Dr. Sasmita Mishra (February-2018) in their study on empirically examines the relationship
between working capital management and profitability of a case of JK Lakshmi Cement Limited
for assessing the impact of working capital management on profitability during the period of 12
years (from 2004-05 to 2015-16). For the analysis of the data, ratios relating to working capital
management have been computed on the basis of the data available of JK Lakshmi Cement
Limited like Current Ratio(CR),Quick Ratio(QR),Current Asset to Sales Ratio(CASR),Current
Assets to Total Assets Ratio(CATAR),Working Capital Turnover Ratio(WCTR),Debtors
Turnover Ratio(DTR),Inventory Turnover Ratio(ITR),and Creditors Turnover Ratio(CTR) are
the ratios which are used for highlighting the efficiency of working capital management and the
Return On Net Worth (RONW)has been selected as the measure of profitability.

Dr. DC Gupta (2018) in their study focused on analysis of the Effect of Working Capital
Management on Corporate Income Empirical Evidence from India. The main objective of this
article is to examine the impact of working capital of Indian companies on profitability. In this
study there are five tools are used for the analysis of working capital management. They are
Regression, Asset Income, Accounts Payable, Current Ratio, and Leverage as it helps to
identification of working performance of firm and future decision making. Under this study the
results show that working capital management and profitability are positively correlated with
Indian companies. So it concluded that working capital management has significant impact on
profitability on the basis of analysis working capital management.
Prof. Kushagra Goel, Surya Jain,(2017) in their study on Impact of Working Capital
Management on Profitability. This study attempts to identify the effect of working capital on
profitability in the Indian Textile Industry. The purpose of this study is to suggest some measures
for improvement in of working capital management in day to day activities of business.
Variables used in this study include Return on Assets and Return on Equity for profitability and
Debtor's Collection Period (DCP), Inventory Holding Period (IHP), Creditor's Payment Period
(CPP), Cash Conversion Cycle (CCC) and Current Ratio (CR) for working capital management.
The research methodology used in this study is descriptive statistics, correlation analysis and
regression models. Under this study it show that there is a significant correlation between the
profitability and working capital variables, for instance, there exists a negative correlation
between Return on Assets and Debtor's Collection Period (DCP), Inventory Holding Period
(IHP), Creditor's Payment Period (CPP) and Cash Conversion Cycle (CCC). So it can conclude
that Working capital is an important part of the capital of firm which helps to carry out day to
day activities.

Sumathi A and Narasimhaiah T(2016) in their study on the effect of working capital
management and profitability of Infosys. The efficient management of working capital is crucial
to the profitability of firms, so the current and fixed assets are provide an important role in the
success of any company. The main objective is to maintaining the liquidity of the firm. The
various components for measuring the working capital management include the receivable days,
Inventory turnover ratio, Payable days, Cash conversion cycle, Current ratio and Quick ratio on
the Net operating profitability position of the Indian companies. In this research find that
increase in working capital helps in improving its Liquidity and decrease in working capital that
inversely affect the liquidity of the company. Thus, a company needs to have a correct balance
between the liquidity position and the profits of the company.

Dr. E. LOKANADHA REDDY (2017) in their study focused on analysis of the impact of
working capital management on performance of Excel Tube Corporation. The objective of this
study is to find out whether a significant impact on profitability and performance of an
organization. The data has been collected from secondary sources like annual reports published
the organization, and trade journals from international repute organizations. Ratio analysis
techniques have been adopted to analyze the data to determine the financial performance of
Excel Tube Corporation. So it can conclude that Working capital is an important part of the
capital of firm which helps to carry out day to day activities.

Albert Amponsah Addae,Michael Nyarko-Baasi (2013) in their study on Working Capital

Management and Profitability: An empirical Investigation in an Emerging Market. The fixed and
current assets play a crucial role in the success of any company. Those current assets are
essential for smooth business operations and proper utilization of fixed assets. Working capital is
an effective tool for the measurement of both company effectiveness and its short-term financial
position. The main aim is to examine the effect of working capital management (WCM) on
firms’ performance for non-listed Ghanaian firms. The paper includes conceptual as well as
empirical analysis in which data from a sample of non-listed firms from 2004-2009 are analyzed
to examine if efficient WCM improves firms’ profitability. Managing the working capital is
mandatory because, it has a huge significance on profitability and liquidity of the business
concern. The increase in working capital helps in improving its liquidity. The various
components are used for measuring the working capital management includes the receivable
days, Inventory turnover ratio, Payable days, Cash conversion cycle, Current ratio and Quick
ratio on the Net operating profitability position of the companies. The various factors like fixed
assets on total assets, the Debt ratio and the size of the firm have also been used for measuring of
the working capital management. In this research we can find that the effects of different
components of working capital on the profits of the firm are essential for the growth of the
company and making of better decision. Thus, a company needs to have a correct balance
between the liquidity position and the profits of the company.