Working Capital Management

To any organization, a well designed and implemented working capital management is expected to contribute positively to the creation of a firm¿s value. ¿Working Capital¿ is the capital invested in different items of current assets needed for the business, viz, inventory, debtors, cash and other current assets such as loans & advances to third parties. Those current assets are essential for smooth business operations and proper utilization of fixed assets. The firm should maintain sufficient level of working capital to produce up to a given capacity and maximize the return on investment in fixed assets. Shortage of working capital leads to lower capacity utilization, lower turnover and hence lower profits. Working Capital, in excess of the amount required to produce to full capacity, is idle and consequently leads to decline in profits. The present study concentrates on the main components of working capital like inventory management, receivables management and cash management of Heavy Engineering Public Sector Manufacturing Companies in India. It also examines the relationship between profitability and working capital of select sample.