Abstract
This paper analyses the factors working capital management of Indian manufacturing firms using factor analysis. The analysis uses 11 variables as a combination of working capital ratios and cash flows. The authors apply principal component analysis to extract the maximum amount of variance accounted for a minimum number of factors that would give a reduced set of uncorrelated latent variables using a set of linear combinations of the original variables. The study finds cash conversion cycle to be correlated with the other variables and eliminated. Networking capital to total assets ratio has a complex structure, so it is dropped from the analysis. The factor analysis classifies the nine variables into four factors. It was obvious from the classification that the factors are pertained to assets, policy, convertibility and operational, which can give a direction to the decision makers.
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