Liquidity and Profitability Analysis: An In-Depth Study of Textile Manufacturing Industry in Gujarat

The structure of working capital and liquidity analysis plays a vital role in the process of wealth maximization of shareholders. The firms should, therefore, make wise investment in various components of current assets. Having made an attempt to study effectiveness of structuring the working capital, the study revealed that the sample companies on an aggregate basis most of their funds invested in inventories, followed by loans and advances and trade receivables. The firms had held very insignificant amount of funds in cash and near cash assets. The study also indicated that the variation between current assets turnover and working capital turnover was quite high across the industry. However, the sample companies had good current ratios which also imply sound liquidity position of sample companies. The hypothesis testing done through one-way ANOVA revealed that the average current ratios, the average quick ratios, the average ratios of current assets to total assets, the average ratios of current assets to sales, the average current assets turnover ratios and the average working capital turnover ratios of sample companies differ significantly.