Working Capital Management & Profitability

The growth and development of any business is depends upon availability and management of financial resources. A business concern acquires fund from various sources and invest in its current and noncurrent assets. Current assets help in running of day to day operation of business whereas non current assets help in production or trading activities. Current assets ensure the liquidity in the business which has impact on profit earning of the business. An excess or shortage of liquidity both has adverse impact on profitability. So the decision regarding investment and management in current assets, which is also known as working capital management, is very crucial for all business.

The efficiency of firm to earn profit largely depends on working capital management. A tradeoff between profitability and liquidity always necessary. In our study, it is seen liquidity position of the MMTC Ltd was not satisfactory during study period, and the profitability position was little in favor but not good. This study also reveals that there is a positive correlation coefficient exists between liquidity and profitability of the company. On the basis of testing, it is seen liquidity has impact on profitability.