Working Capital Management Concepts

Purpose of the study was to analyze the working capital management in terms of profitability and liquidity. In business cash is important thing, without cash company cannot survive and to take advantage of business opportunities, it’s necessary to maintain liquidity position to overcome the difficulties. The Population of the study was all the companies listed in the NSE. The data is used on the basis of profitability random sampling. Secondary data was used from the journals and internet. The data was analyzed through the regression analysis to find out the impact of liquidity on profitability, Correlation analysis was used to find out the relationship between liquidity with profitability. The empirical investigation using both the partial correlation and regression analysis revealed that liquidity ratios measure by current ratio (CR), Liquid ratio (LR) and Cash Turnover Ratio, CATAR, CLTAR have a diminutive relationship with profitability measured by return on capital employed (ROA and ROI). It also revealed that CR and LR are negatively associated with ROA and ROI, while Cash Turnover Ratio (CTR) is negatively associated with ROI and ROA. It is worthy to mention here that the inverse direction reveals with respect to CR and LR with profitability ratios ROA and ROI is very informative of the fact as it proves the theoretical foundation (liquidity- profitability trade off theory) which posts that profitability and liquidity are inversely related or that there must always be a trade-off between profitability and liquidity