Abstract
Working capital management involves the various steps for the proper management of current assets and current liabilities which avoids the risk of a shortage of funds for meeting short-term obligations and eliminates the blocking of funds in current assets on the other hand. The present study makes an attempt to give a conceptual insight on working capital management and assess its impact on liquidity and profitability of Kerala Minerals and Metals Ltd. A proper tradeoff between profitability and liquidity is necessary for every enterprise to survive in any kind of environment. The study also made an attempt to analyse the liquidity and profitability position of KMML. For this, correlation and spearman’s rank has been used. The study covers ten-year data from 2009-10 to 2018-19. The correlation and spearman’s ranking method exhibits a weak correlation and negative relationship between liquidity and profitability. The Motaal’s test has also been applied to test the liquidity position. The liquidity ratios such as the current ratio and liquid ratios are higher than the benchmark which means that the liquidity position is good. The study indicates that the liquidity position of the enterprise has enhanced over the period of study.
Highlights
In the era of modern competitive world, it has become a challenge to maintain financial strength of business houses on a day to day basis
The Compound Annual Growth Rate (CAGR) for working capital turnover ratio is decreasing at the rate of 3.53 while the CAGR for working capital for current assets is increasing at the rate of 0.61
The selected performance indicators in this study have shown an optimistic trend except for debtor’s turnover ratio and stock velocity
Summary
In the era of modern competitive world, it has become a challenge to maintain financial strength of business houses on a day to day basis. The attributes of financial discipline such as liquidity, profitability and solvency can be ensured thorough the efficient practicing of the principles of working capital management. In order to achieve financial soundness, an organiastion must have efficient management of working capital in place. Two concepts are there for working capital, namely, the operating cycle concept and balance sheet approach. The concept of operating cycle supports the operational activities of the enterprise whereas the balance sheet concept includes the gross and net working capital. All business houses have to manage its working capital strictly in order to meet its short-term fund requirements. It should have the alertness about the amount of investment in the working capital. Effective policies on working capital management can be framed by the enterprises to operate their business efficiently. A company shall frame separate polices on the different constituents of working capital
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