Review of Literature

Topics: Finance, Economics, Inventory Pages: 2 (502 words) Published: October 23, 2012
Research works in working capital management gives us an outstanding view about the exploration of the topic in different dimensions by different authors. The authors have emphasized that working capital management has to be effectively utilized for generating funds from sales. They have examined the efficiency of working capital management in different aspects.

Chakra borty P K. (2004)
Stated that the conventional method of measuring liquidity would not be sufficient to cover this extended view of liquidity and new framework must be developed to cover analysis of amount and trend of internal cash flow, which is the better proposition to focus on a firm’s liquidity position than those based on financial ratios. Reddy Y V. and Patkar S B. (2004)

Stated that sundry debtors and amount due to creditors are the major components of current assets and current liabilities respectively in determining the size of the working capital. Haworth C. and West head P. (2003)

In their study of working capital in small firms of the UK found that firms focus only on those areas where they expect to improve marginal returns. Narasimhan and Murthy
Stress on the need for many industries to improve their return on capital employed(ROCE) by focusing on some critical areas such as cost containment, reducing investment in working capital and improving working capital efficiency. Sanger emphasized that working capital has increasingly been looked at as a restraint on financial performance since these assets do not contribute to return on equity. The study undertaken by Peel et al (2000) revealed that small firms trend to have a relatively high proportion of current assets, less liquidity, exhibit volatile cash flows and a high reliance on short term debt. Shin and Soenen (1999)

Found that long term funds were used for working and observed that flexibility and adjustment...
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