1Finance Faculty, Jaipuria Institute of Management, Lucknow.
2Partner, S. Vishnani & Co., Chartered Accountants, Lucknow.
It is felt that there is the need to study the important role of working capital in profit generating process. If a company desires to take a greater risk for bigger profits and losses, it reduces the size of its working capital in relation to its sales. If it is interested in improving its liquidity, it increases the level of its working capital. However, this policy is likely to result in a reduction of the sales volume, therefore of profitability. Hence, a company should strike a balance between liquidity and profitability. In this paper an effort has been made to make an empirical study of Indian Consumer Electronics Industry for assessing the impact of working capital on profitability during the period 1994–95 to 2004–05. The impact of working capital on profitability has been examined by computing co-efficient of correlation and regression analysis between profitability ratio and working capital ratio.
