A study on liquidity, profitability and working capital management of Bharuch district Co-Operative Milk Producers’ Union Limited (Dudh Dhara Dairy)

Working capital is an integral part of overall business finance for the smooth operations of a business. An optimal management of working capital is one of the pre-conditions for the success of a business. Efficient management of working capital ensures that the business operating cycle keeps moving without any hurdles in terms of payment of liabilities and procurement of raw materials. Efficient management of working capital means management of various components of working capital in such a way that adequate amount of working capital and liquidity is maintained for smooth running of an enterprise. The flow of money gets choked, the supplies are interrupted and payments are delayed in the event of inefficient management of working capital. While inadequate working capital has the potential to disrupt production or sales operation and is a unfavorable, excessive working capital has an adverse impact on profitability and is a criminal waste. Management of working capital is regarded as an essential tool of business finance focusing on maintaining optimum levels of both the components viz. current assets and current liabilities. Thus there is an essential need to manage working capital effectively.

In this study, we have selected Bharuch District Co-Operative Milk Producers’ Union Limited (Dudh Dhara Dairy) as a sample and taken the financial data for the period of Seven years from 2003–04 to 2009–10 and studied the effect of different components of working capital.