Analysis of Efficiency of Asset Management of Selected Public Sector Oil and Gas Companies in India

In efficiency in asset management, liquidity and profitability are the two important aspects as it involves a trade-off between these two. Here liquidity means risk of technical insolvency (not legal insolvency) for failing to meet contractual commitments and risk of disruption of normal production activities. To reduce risk as much as one can keep the assets in liquid form, profitability reduces for non-investment of the fund but to increase profitability as much as one can invest the fund, risk increases. Top professional management is to design a policy so that risk can be minimized and profitability can be maximized to strike a balance between risk and profitability. This article concentrating on the study of associations between the selected ratios relating to efficiency in asset management (viz. FATR, TATR, WCTR, ITR, DTR and CTR) and profitability ratio (measured in terms of ROCE) of the selected public sector oil and gas companies in India during the study period from 2000–01 to 2014–15. For computation and analysis of data, correlation analysis has been applied taking into account their magnitudes by Pearson's simple correlation coefficient, for ranking of their magnitudes by Spearman's rank correlation coefficient and for highlighting the nature of their associated changes by Kendall's correlation coefficients. In order to examine whether the computed values of correlation coefficients between the measure of profitability and ratios relating to efficiency in asset management are statistically significant or not, t-test has been applied.