Working Capital Management and its Impact on Profitability: A Case Study MSIL

Working capital management, one of the important disciplines of management, can be considered as an important factor of survival of any business organization. Business organization whether small or large needs two form of capital that is fixed assets and working capital. A fixed asset helps the organization to fulfill infrastructural demand while working capital caters the operative demand the organization. Lack of fixed assets leads to profits minimization while shortage or lack of working capital leads to business failure both short as well as long run. Since fixed assets required only at the inception of the business organization while working capital required at every stage of the business organization hence its becomes essential to understand the concept of working capital and its importance in business organization short as well as long run. Excessiveness or deficiencies are one of the most important characteristics of working capital as excess or high level of working capital creates the situation of high liquidity on the other hand deficiency affect profitability. Since the main thrust of working capital is to provide funds whenever required therefore we need maintained a trade-off between profitability and liquidity. Present study is an attempt to find out impact of working capital management on the profitability of automobile industry in India which is one of the largest auto industry in the world with fourth largest manufacturer of cars and seventh largest manufacturer of commercial vehicles in the year of 2019. For data analysis ROCE was assumed as dependent variable for profitability while CR, DTR, ITR were assumed as independent variable for substantiating the impact of working capital management on the profitability of Maruti Suzuki India Ltd..