The crucial part in working capital management is to maintaining its liquidity in day-to-day operations to ensure its smooth running and meets its obligation. Yet, this is not a simple task since managers must make sure that business operation is running in efficient and profitable manner. This will happen because of framing of suitable working capital policies to the organization otherwise there are the possibilities of mismatch of current assets and current liabilities during this process. If this happens and firm's manager cannot manage it properly then it will affect firm's growth and profitability. This will further lead to financial distress and finally firms can go bankruptcy. Managers can create value if they adopt a conservative approach towards working capital investment and working capital financing policies. In this direction the present study investigates the relationship between working capital management policies and a firm's profitability. Using the panel data set for the period 2007–08 to 2010–11, the impact of aggressive working capital investment and financing policies has been evaluated using return on assets as well as Tobin's q.
Conservative Approach, Profitability, Return On Assets, Tobin's q, working capital management
