Impact of Financial Management on Profitability: Evidences from Textile Sector of India

Abstract

This research paper aims to examine the relationship between financial management and profitability of domestically listed companies in the Indian textile sector. The variables considered are Long Term Debt To Equity Ratio, Current Ratio, Inventory Ratio, Debtors Ratio and Profit After Tax To Sales Ratio. The observations were analyzed using statistical techniques including multiple regression analysis. The results suggest that Long Term Debt to Equity, though negative, has moderate influence on the Profit after tax to Sales of the enterprise. However, Current ratio and Debtors Ratio have positive association with Profit after Tax to Sales but not statistically significant. Similarly Inventory Ratio having negative association with Profit after tax to Sales is not found to be relevant. This research may help the corporate managers and research scholars to improve their understanding of financial management in their pursuit to find ways to optimize profits of the enterprise.