Research Paper on Working Capital Management

Topics: Option, Implied volatility, Call option Pages: 38 (12116 words) Published: April 13, 2012
International Research Journal of Finance and Economics ISSN 1450-2887 Issue 46 (2010) © EuroJournals Publishing, Inc. 2010

Working Capital Management in Indian Tyre Industry
Jasmine Kaur Assistant Professor in Guru Arjan Dev Institute of Management & Technology, New Delhi E-mail: Tel: (91) 9811160007; (91)9811669777; (91) (011) 25133012 Abstract The management of Working Capital is one of the most important and challenging aspect of the overall financial management. Merely more effective and efficient management of working capital can ensure survival of a business enterprise. Working Capital Management is concerned with the problems that arise in attempting to manage the Current Assets, Current Liabilities and the interrelation that exists between them. This is a two-dimensional study which examines the policy and practices of cash management, evaluate the principles, procedures and techniques of Investment Management, Receivable and Payable Management deals with analyzing the trend of working capital management and also to suggest an audit program to facilitate proper working capital management in Indian Tyre Industry. The study covers a production of 8 year viz, 1999-2007. For the purpose of investigation both primary and secondary data is used. The collected data is analyzed by applying research tool which include accounting tools like Analysis, Cash Flow Analysis, Common Size and Trend Analysis. They reveal that there is a stand off between liquidity and profitability and the selected corporate has been achieving a trade off between risk and return. Efficient management of working Capital and its components have a direct effect on the profitability levels of tyre industry. Keywords: Working Capital Management, Cash Management, Inventory Management, Receivables and Payables Management, Indian Tyre Industry.

Working Capital Management refers to all management decisions and actions that ordinarily influence the size and effectiveness of the working capital. It is concerned with the most effective choice of working capital sources and the determination of appropriate levels of the current assets and their use. It focuses attention to the managing of current assets, current liabilities and the relationships that exist between them. In the present day of rising capital cost and scarce funds, the importance of working capital needs special emphasis. It has been widely accepted that the profitability of a business concern likely depends upon the manner in which its working capital is managed. The inefficient management of working capital not only reduces profitability but ultimately may also lead a concern to financial crises. On the other hand, proper management of working capital leads to a material savings and ensures financial returns at the optimum level even on the minimum level of capital employed. Both excessive and inadequate working capital is harmful for a firm. Excessive working capital leads to unremunerative use of scarce funds. On the other hand, inadequate working capital usually interrupts the normal operations of a business and impairs profitability. There are many instances of business failure for inadequate working capital e.g. Modi Rubbers. Further, working capital has to play a vital role to


International Research Journal of Finance and Economics - Issue 46 (2010)

keep pace with the scientific and technological developments that are taking place in the area of tyre industry. Also, the current financial parameters of tyre industry are much less than the desired level. In this context, an attempt has, therefore, been made to undertake an indepth study on working capital management of Indian Tyre Industry.

Objectives of the Study
The primary aim of our study is to examine and assess management of working capital of selected companies of Indian Tyre industry i.e. JK, MRF, Apollo, Ceat. In this broader framework...
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