Factors Determining Working Capital Requirements of Power Distribution Utilities in India

Abstract

The working capital management of firms is very important in determining the level of working capital required by the firm. The nature of the business or industry influences working capital requirement of a firm. These specific factors which are unique to each Industry will help in deciding the level of working capital requirements of the firm/utility. This study has focused on power distribution utilities which run to cater to the needs of the public, requires less working capital. Therefore, the study attempts to fill this gap by examining the key factors that influence working capital requirement of select power distribution utilities in India. Data was collected from 44 general managers in finance and accounting department. According to the respondents, the study found that the major factors that influence working capital requirement in power distribution utilities are industry effect, business and economic environment, government rules & regulations, credit policy, inventory management policy, and payable policy. The study suggests that the managers of power distribution utilities should consider these factors while formulating working capital requirement, to manage these funds effectively.