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4 REVIEW OF LITRATURE

Marc Deloof. (2003). The relation between working capital management and corporate
profitability is investigated for a sample of 1,009 large Belgian non-financial firms for the
1992-1996 period. Trade credit policy and inventory policy are measured by number of days
accounts receivable, accounts payable and inventories, and the cash conversion cycle is used
as a comprehensive measure of working capital management. The results suggest that
managers can increase corporate profitability by reducing the number of days accounts
receivable and inventories. Less profitable firms wait longer to pay their bills. On the basis of
these results he suggested that managers could create value for their Shareholders by
reducing the number of days’ accounts receivable and inventories to a reasonable minimum.

Janki Ramudu P & Durga Rao Journal of Applied Finance (2007). This paper examines
the efficiency of receivables management of the Indian commercial vehicles industry. The
study reveals that the industry as a whole had managed receivables efficiently, whereas a few
individual companies had far less satisfactory scores in this respect. Receivables are usually
provided to push up the overall sales revenue, that eventually helps a irm to report higher
profit. Under this study-“Receivables Management of Indian Commercial Vehicle Industry”,
revealed that the industry had managed receivables efficiently whereas a few individual
companies had for less satisfactory scores in this respect.

Kannadhasan M.(2008) founded this study-“Receivables Management in a Public


Ltd.Company” that the efficiency of receivables management in public ltd. company was
satisfactory. Accounts receivables are one of the major components of working capital.
Receivables are a direct results of credit sales. The sale of goods on credit is an essential part
of the modern competitive economic system. Moreover increase in receivables will increase
that investment and also increase changes of bad debts. This study concludes that the
efficiency of the receivables management of this company was satisfactory.

Amarjit Gill & Nahuman Biger & Neil Mathur (2010). Seek the relationship of working
capital management on gross operating profit of 88 American firms listed on New York stock
exchange for a period of three years from 2005-2007. They use regression analysis and cash
conversion cycle as a proxy of working capital and concluded that a firm with slow collection
of account receivables is negatively correlated with profitability. However they found that
account payable in days and inventory turnover in days has on significant affect on firm’s
profitability.
Huynh Phuong Dong & Jyh-tay Su (2010) Investigated the relationship between the cash
conversion cycle and profitability, measured through gross operating profit. Their research is
based on a sample of 130 firms listed companies on the Vietnam stock market between 2006
and 2008. The cash conversion cycle has been split into the number of accounts receivable,
number of day’s accounts payable and the number of day’s inventory. With a correlation
analysis and a multiple regression analysis in which controlled the sales, debt ratio and fixed
financial assets to total assets they conclude that there is a strong negative 28 relationship
between the number of days accounts receivable, number of days inventories and cash
conversion cycle with corporate profitability. There is shown a positive relation between
numbers of days accounts profitability. The study claimed that managers can create value for
their shareholders by reducing the cash conversion cycle and those more profitable firms wait
longer to pay their bills.

D. P. Singh (2012). Present study is about investigating the impact of growing size of the
company on working capital levels. I considered measures of working capital levels of a
company such as net working capital and working capital to sales. The investigation is about
how growing size of the company affects working capital levels. I investigated the
relationships between size of the firms and various working capital levels, such as net
working capital ratio working capital to sales ratio. It is observed that net working capital
level and working capital to sales ratio is negatively related to size of the firms. Two
relationships net working capital ratio, working capital to sales ratio were found significant at
1%.As no work in the past is done on this relationship our results will significantly contribute
to the body of knowledge

Venkata N.R, Ramakrishnaiah R, and Chengalrayulu P (2013). His study impact of


receivables management on working capital and profitability : A study of selected cement
companies in Indian collected their data from the animal reports the selected cement
companies from 2001 -2010. the ratios which highlight the efficiency of receivables
management viz, receivables to current assets ratio receivable to total assets ratio, receivable
to sales ratio, receivable to turnover ratio, average collection period, working capital ratio
profitability ratio have been completed using ANOVA statistical tool to know the impact of
working capital and profitability of the selected cement companies. Working capital
management and profitability were considered as dependent variables. The investigation
reveals that the receivable management across cement industry is efficient and showing
significant impact on working capital and profitability.
Anastasia Nwakaego Dura & Michel Chidiebera Ekwe (2014). Receivable management is
an important fact of financial management. Their accurate monitoring and proper
management are also important dimensions in organization. This study examines the impact
of receivables management on profitability of food and beverages manufacturing companies
in Nigeria. The variables include, accounts receivable, debt and sales growth. Secondary
sources of data were used for the period 2000-2011. The hypotheses were analyzed using the
multiple regression analytical tools. The findings show that accounts receivable had negative
and non-significant relationship with profitability, while debt had positive but non-significant
relationship with profitability of food and beverages manufacturing companies in Nigeria.
Finally, sales growth also had positive and non-significant relationship with profitability.

Haresh & Barot (2014) This paper observed a negative relationship between accounts
Receivables and corporate profitability and a positive relationship between accounts payable
and profitability. Consequently, it appears profitability dictates how managers act in terms of
managing accounts receivables. Thus the findings of this paper suggest that managers can
creative value for their shareholders by reducing the number of days for accounts receivables.
In addition the negative relationship between accounts receivable and firms profitability
suggest that less profitable firms should pursue a decrease of their accounts receivables in an
attempt to reduce the cash gap in the cash conversion cycle. On the basis of findings of this
paper we conclude the profitability can be enhanced if firms mange their working capital in
more efficiently way.

Quest Journals Journal of Research in Humanities and Social Science (2015) (Online) :It
states that, “This study is very important since many organizations are becoming victims of
premature death. The study examines the effect of the management of accounts receivable on
the profitability of Industries. The data were collected from the Annual Reports of the
companies under study. The hypotheses were tested using multiple regression technique. At
the end of the study, the results showed that accounts receivable had positive and significant
effects with the profitability ratio at 1% levels of significance. This means that unit increase
in the variables shall bring about corresponding increase in the profitability ratio of the
Building Chemical and paint companies in Nigeria. Both Debt ratio and sales growth rate had
negative and non-significant effect on these companies.

Anastasia Duru and Madubuko Cyril Ubesie (2016) This study examines the effect of the
management of accounts receivable ratio on the profitability of industrial/Domestic products
manufacturing firms in Nigeria. The variables of this study include accounts receivable ratio,
debt ratio and sales growth rate. Only secondary sources of data were used for the period
2000-2011. The hypotheses were tested using the multiple regression technique. The results
show that accounts receivable ratio, debt ratio and sales growth rate had positive and
significant relationship with the profitability of the firms under study.

Rita Remeikiene & Ligita Gaspareniene & Gintare Grigaliune (2016). Constant changes
in business environment determine the significance of receivables to business. The analysis
of the current situation in Lithuania has revealed that a substantial part of business enterprises
are facing the problem of overdue receivables. This issue emerged as extremely topical after
the beginning of the economic crisis in 2008. A number of scientific studies confirmed that
the level of receivables has a significant impact not only on smooth business operation but
also on operational results and serves as the cause of numerous economic and social
problems, faced by both business enterprises and the state. Rising level of receivables
determines slower recovery of total economics because it has a negative impact on the
sustainability of the public sector of the country. In addition, the scientists highlight
economic problems such as production capacity losses, general decrease in competitiveness
and failure to satisfy the debt claims. The social problems include the increase in
unemployment rate, fall of living standards, dissatisfaction with poor economics of the
country and uncertainty about the future. The aim of this article is to analyse the impact of
receivables on business in Lithuania. The methods of the research include scientific literature
analysis and statistical data analysis.

B.Vijayalakshmi & M. Sailaja (2016). Debtor management is heart of every business.


Making a sale is fine, but collecting the cash is ultimately what matters. Selling goods and
services on credit, results in blocking of funds in accounts receivable. The interval between
the date of sale and date of payment has been financed out of working capital. Additional
funds are therefore required for the operational needs of the business which involves extra
costs in term of interest. The present study is an attempt to analyze Debtors management with
the help of debtors turnover ratio in APSPDCL and APEPDCL. For this study the statistical
tools like percentage, averages and t-test are used. The study reveals that an efficient debtor’s
management process results in enhanced operating efficiencies, effective billing procedures
and quick dispute resolution. It additionally requires less management time to be spent on
administration and processing issues allowing senior management to focus on key strategic
issues and on growth of business.
Pinku Paul & Paroma Mitra Mukherjee (2016). Study the receivable management in
select companies of Indian automobiles industry with help us sample of three companies. The
study concluded that the performance of companies in the auto mobile industry in respect of
receivables management was satisfactory. The study used our ratios and two way ANOVA
test to analyze the receivables management. Relate to above differences in this article our
objectives is to compare the receivable management in Automobile industry. The study will
proceeding by taking a sample of top three automobile companies in India. Management
efficiency is calculated for five major players of Automobile industry. To calculate the
efficiency five important ratios – Inventory turn over ratio, dept turnover ratio, investment
turnover ratio, fixed assets turnover ratio and total turnover ratios are taken into
consideration.

Ms Divya. P & Solanki (2017). In depth analysis tells that most in case research work is
observed and focused mainly on two aspects, working capital on profitability of firm and
working capital management.The chief issues with previous literature are lack of survey-
based approach and lack of methodical theory advance study, which gives direction and idea
for future research. The proposed future research direction is given in this paper may help to
develop a better understanding of determinants and practices of working capital management

Vadakarai (2017). In this study titled with “A Study on Receivables Management variables
and Investments in Plant & Machinery” found that the receivables management variables
depend upon the investment made in plant & machinery equipments.

Sanjay J. Bhayani and Butala Ajmera( 2018) In their study – “Receivables Management in
Refinery Industry in India. An Empirical Study “ found that the level of investment in
receivables as a percentage of sales across the industry was reasonably less.

BIBLIOGRAPHY

REFERNCES

Anastasia Nwakaego Dura & Michel Chidiebera Ekwe (2014) European Journal of
Accounting Auditing and Finance Research Vol-2 ~ Issue No-10 pp.34-47.

Anastasia Duru and Madubuko Cyril Ubesie (2016) European Journal of Accounting,
Auditing and Finance Research Vol.4, No.9, pp.84-97 ISSN 2054-6327 (Online).
B.Vijayalakshmi & M. Sailaja (2016) International Journal of Management Economics
Invention (IJEI) Vol : 2 ~ Issue No:11 Pg No: 1116-1122, ISSN:2395-7220

D. P. Singh (2012) Indian Journal of Commerce & Management Studies (IJCM) Vol : 3
~ Issue : 1, ISSN : 2249-0310

Huynh Phuong Dong & Jyh-tay Su (2010) International Research Journal of Finance
and Economics (IRJFE) Volume 49 ~ Issue (4) ISSN : 1450-2887 .

Haresh & Barot (2014) (IJRMT) Volume 4 ~ Issue (5) ISSN : 2249-9563 .

Marc Deloof.(2003) Journal of Business Finance & Accounting, 2003, vol. 30, issue 3-4,
573-588.

Ms Divya. P & Solanki (2017) International Journal Advanced Research (IJAR) Vol : 5
~ Issue No : 12 PP No : 336-342, ISSN : 2320-5407

Pinku Paul & Paroma Mitra Mukherjee (2016) Volume 12 ~ Issue 3-4 pg no:242-249

Quest Journals Journal of Research in Humanities and Social Science Volume 3 ~ Issue
10 (2015) pp:01-06 ISSN(Online) : 2321-9467

Rita Remeikiene & Ligita Gaspareniene & Gintare Grigaliune Economics and Culture
(2016) Vol-13 ~ Issue No-01.

Sanjay J. Bhayani and Butala Ajmera( 2018) Indian Journal of Accounting (IJA)
Volume 50 ~ Issue (2) pp:101-110 ISSN(Online) : 0972-1479.

Vadakarai (2017) Imperial Journal of Interdisciplinary Research (IJIR) Vol-3, Issue-4

Venkata N.R, Ramakrishnaiah R, and Chengalrayulu P,(2013) international journal of


marketing, financial management and management research vol. 2, no.3,
FULL REVIEW
FRESH REVIEW

Working capital is very important for every company to meet day to day operation expenses
and urgent payments. Effective working capital increases the company profit and vice versa.
For effective working capital, collection days should be less and payment days should be
more overall cash conversion cycle should be very low or negative.

Marc Deloof. (2003). The relation between working capital management and corporate
profitability is investigated for a sample of 1,009 large Belgian non-financial firms for the
1992-1996 period. Trade credit policy and inventory policy are measured by number of days
accounts receivable, accounts payable and inventories, and the cash conversion cycle is used
as a comprehensive measure of working capital management. The results suggest that
managers can increase corporate profitability by reducing the number of days accounts
receivable and inventories. Less profitable firms wait longer to pay their bills. On the basis of
these results he suggested that managers could create value for their Shareholders by
reducing the number of days’ accounts receivable and inventories to a reasonable minimum.

Janki Ramudu P & Durga Rao Journal of Applied Finance (2007). This paper examines
the efficiency of receivables management of the Indian commercial vehicles industry. The
study reveals that the industry as a whole had managed receivables efficiently, whereas a few
individual companies had far less satisfactory scores in this respect. Receivables are usually
provided to push up the overall sales revenue, that eventually helps a irm to report higher
profit. Under this study-“Receivables Management of Indian Commercial Vehicle Industry”,
revealed that the industry had managed receivables efficiently whereas a few individual
companies had for less satisfactory scores in this respect.

Kannadhasan M.(2008) founded this study-“Receivables Management in a Public


Ltd.Company” that the efficiency of receivables management in public ltd. company was
satisfactory. Accounts receivables are one of the major components of working capital.
Receivables are a direct results of credit sales. The sale of goods on credit is an essential part
of the modern competitive economic system. Moreover increase in receivables will increase
that investment and also increase changes of bad debts. This study concludes that the
efficiency of the receivables management of this company was satisfactory.

Huynh Phuong Dong & Jyh-tay Su (2010) Investigated the relationship between the cash
conversion cycle and profitability, measured through gross operating profit. Their research is
based on a sample of 130 firms listed companies on the Vietnam stock market between 2006
and 2008. The cash conversion cycle has been split into the number of accounts receivable,
number of day’s accounts payable and the number of day’s inventory. With a correlation
analysis and a multiple regression analysis in which controlled the sales, debt ratio and fixed
financial assets to total assets they conclude that there is a strong negative 28 relationship
between the number of days accounts receivable, number of days inventories and cash

Amarjit Gill & Nahuman Biger & Neil Mathur (2010). Seek the relationship of working
capital management on gross operating profit of 88 American firms listed on New York stock
exchange for a period of three years from 2005-2007. They use regression analysis and cash
conversion cycle as a proxy of working capital and concluded that a firm with slow collection
of account receivables is negatively correlated with profitability. However they found that
account payable in days and inventory turnover in days has on significant affect on firm’s
profitability.

D. P. Singh (2012). Present study is about investigating the impact of growing size of the
company on working capital levels. I considered measures of working capital levels of a
company such as net working capital and working capital to sales. The investigation is about
how growing size of the company affects working capital levels. I investigated the
relationships between size of the firms and various working capital levels, such as net
working capital ratio working capital to sales ratio. It is observed that net working capital
level and working capital to sales ratio is negatively related to size of the firms. Two
relationships net working capital ratio, working capital to sales ratio were found significant at
1%.As no work in the past is done on this relationship our results will significantly contribute
to the body of knowledge
GargPawan Kumar (2012) focuses on the study of working capital trend and liquidity
analysis in the selected public sector enterprises of Haryana. The study suggests forecasting
of working capital requirement confined mainly to various components of working capital.
After considering the facts the author realized the need for proper assessment and forecasting
of working capital in the public sector undertaking. For this purpose, he has suggested the
analysis of production schedule, sales trend, labour cost etc., should be taken into
consideration. He further suggested the need for better management of components of
working capital.

Venkata N.R, Ramakrishnaiah R, and Chengalrayulu P (2013). His study impact of


receivables management on working capital and profitability : A study of selected cement
companies in Indian collected their data from the animal reports the selected cement
companies from 2001 -2010. the ratios which highlight the efficiency of receivables
management viz, receivables to current assets ratio receivable to total assets ratio, receivable
to sales ratio, receivable to turnover ratio, average collection period, working capital ratio
profitability ratio have been completed using ANOVA statistical tool to know the impact of
working capital and profitability of the selected cement companies. Working capital
management and profitability were considered as dependent variables. The investigation
reveals that the receivable management across cement industry is efficient and showing
significant impact on working capital and profitability.

Howorth Carole and Westhead Paul (2013) have tried to find out the working capital
management routines of a large random sample of small companies in the UK. Considerable
variability in the take-up of eleven working capital management routines was detected.
Principal components analysis and cluster analysis confirmed the identification of four
distinct “types” of companies with regard to the patents of working capital management.
While the first three „types‟ of companies focused upon cash management, stock or debtors
routines respectively, the fourth „type‟ was less likely to take-up any working capital
management routines. The objective of the study is to encourage additional research rather
than to provide an exhaustive overview of all the factors associated with the take-up of
working capital management routines by small companies. The results suggest that small
companies focus only on areas of working capital management where they expect to improve
marginal returns.

Haresh & Barot (2014) This paper observed a negative relationship between accounts
Receivables and corporate profitability and a positive relationship between accounts payable
and profitability. Consequently, it appears profitability dictates how managers act in terms of
managing accounts receivables. Thus the findings of this paper suggest that managers can
creative value for their shareholders by reducing the number of days for accounts receivables.
In addition the negative relationship between accounts receivable and firms profitability
suggest that less profitable firms should pursue a decrease of their accounts receivables in an
attempt to reduce the cash gap in the cash conversion cycle. On the basis of findings of this
paper we conclude the profitability can be enhanced if firms mange their working capital in
more efficiently way.

Anastasia Nwakaego Dura & Michel Chidiebera Ekwe (2014). Receivable management is
an important fact of financial management. Their accurate monitoring and proper
management are also important dimensions in organization. This study examines the impact
of receivables management on profitability of food and beverages manufacturing companies
in Nigeria. The variables include, accounts receivable, debt and sales growth. Secondary
sources of data were used for the period 2000-2011. The hypotheses were analyzed using the
multiple regression analytical tools. The findings show that accounts receivable had negative
and non-significant relationship with profitability, while debt had positive but non-significant
relationship with profitability of food and beverages manufacturing companies in Nigeria.
Finally, sales growth also had positive and non-significant relationship with profitability.

Eljelly (2014) Identified the relation between profitability and liquidity who was examined,
as measured by current ratio gap (cash conversation cycle) on a sample of joint stock firms as
a measure of liquidity than the current ratio that affects profitability. The size variable was
found to have significant effect on profitability at the industry level. The results were stable
and had important implications for liquidity management in various Saudi firms. First it was
clear that there was negative relationship between profitability and liquidity indicators such
as current ratio and cash gap in the Saudi sample examined. Second, the study also revealed
that there was great vibration among industries with respect to the significant measure of
liquidity.

Lazaridis and Tryfornidis (2015) have explored the relationship between corporate
profitability and WCM in the Athens Stock Exchange. The finding of results shows a
negative relationship between profitability and working capital indicators like days of
accounts receivable, account payable and cash conversion cycle. They concluded that firms
can create profits by effectively handling cash component of the cash conversion cycle.

Quest Journals Journal of Research in Humanities and Social Science (2015) It states
that, “This study is very important since many organizations are becoming victims of
premature death. The study examines the effect of the management of accounts receivable on
the profitability of Industries. The data were collected from the Annual Reports of the
companies under study. The hypotheses were tested using multiple regression technique. At
the end of the study, the results showed that accounts receivable had positive and significant
effects with the profitability ratio at 1% levels of significance. This means that unit increase
in the variables shall bring about corresponding increase in the profitability ratio of the
Building Chemical and paint companies in Nigeria. Both Debt ratio and sales growth rate had
negative and non-significant effect on these companies.

Pinku Paul & Paroma Mitra Mukherjee (2016). Study the receivable management in
select companies of Indian automobiles industry with help us sample of three companies. The
study concluded that the performance of companies in the auto mobile industry in respect of
receivables management was satisfactory. The study used our ratios and two way ANOVA
test to analyze the receivables management. Relate to above differences in this article our
objectives is to compare the receivable management in Automobile industry. The study will
proceeding by taking a sample of top three automobile companies in India. Management
efficiency is calculated for five major players of Automobile industry. To calculate the
efficiency five important ratios – Inventory turn over ratio, dept turnover ratio, investment
B.Vijayalakshmi & M. Sailaja (2016). Debtor management is heart of every business.
Making a sale is fine, but collecting the cash is ultimately what matters. Selling goods and
services on credit, results in blocking of funds in accounts receivable. The interval between
the date of sale and date of payment has been financed out of working capital. Additional
funds are therefore required for the operational needs of the business which involves extra
costs in term of interest. The present study is an attempt to analyze Debtors management with
the help of debtors turnover ratio in APSPDCL and APEPDCL. For this study the statistical
tools like percentage, averages and t-test are used. The study reveals that an efficient debtor’s
management process results in enhanced operating efficiencies, effective billing procedures
and quick dispute resolution. It additionally requires less management time to be spent on
administration and processing issues allowing senior management to focus on key strategic
issues and on growth of business. turnover ratio, fixed assets turnover ratio and total turnover
ratios are taken into consideration.

Rita Remeikiene & Ligita Gaspareniene & Gintare Grigaliune (2016). Constant changes
in business environment determine the significance of receivables to business. The analysis
of the current situation in Lithuania has revealed that a substantial part of business enterprises
are facing the problem of overdue receivables. This issue emerged as extremely topical after
the beginning of the economic crisis in 2008. A number of scientific studies confirmed that
the level of receivables has a significant impact not only on smooth business operation but
also on operational results and serves as the cause of numerous economic and social
problems, faced by both business enterprises and the state. Rising level of receivables
determines slower recovery of total economics because it has a negative impact on the
sustainability of the public sector of the country. In addition, the scientists highlight
economic problems such as production capacity losses, general decrease in competitiveness
and failure to satisfy the debt claims. The social problems include the increase in
unemployment rate, fall of living standards, dissatisfaction with poor economics of the
country and uncertainty about the future. The aim of this article is to analyse the impact of
receivables on business in Lithuania. The methods of the research include scientific literature
analysis and statistical data analysis.
Anastasia Duru and Madubuko Cyril Ubesie (2016) This study examines the effect of the
management of accounts receivable ratio on the profitability of industrial/Domestic products
manufacturing firms in Nigeria. The variables of this study include accounts receivable ratio,
debt ratio and sales growth rate. Only secondary sources of data were used for the period
2000-2011. The hypotheses were tested using the multiple regression technique. The results
show that accounts receivable ratio, debt ratio and sales growth rate had positive and
significant relationship with the profitability of the firms under study.

SaswataChatterjee (2016) Focused on the importance of the fixed and current assets in the
successful running of any organization. It poses direct impacts on the profitability liquidity
There have been a phenomenon observed in the business that most of the companies increase
the margin for the profits and losses because this act shrinks the size of working capital
relative to sales. But if the companies want to increase or improve the liquidity, then it has to
increase its working capital. In the response this policy the organization has to lower down its
sales.

Mohammad and Saed (2017) Used Bloomberg’s database 172 listed companies randomly
selected from Bursa Malaysia main board for five years period from 2003 to 2007, Applying
correlation and multiple regression analysis, they found that current assets to total asset ratio
shows positive significant relationship with Tobin Q, ROA and ROL. Cash conversation
cycle, current asset to current liabilities to total assets ratio illustrates negative significant
relations with Tobin Q, ROA and ROIC.

Vadakarai (2017). In this study titled with “A Study on Receivables Management variables
and Investments in Plant & Machinery” found that the receivables management variables
depend upon the investment made in plant & machinery equipments.

Ms Divya. P & Solanki (2017). In depth analysis tells that most in case research work is
observed and focused mainly on two aspects, working capital on profitability of firm and
working capital management.The chief issues with previous literature are lack of survey-
based approach and lack of methodical theory advance study, which gives direction and idea
for future research. The proposed future research direction is given in this paper may help to
develop a better understanding of determinants and practices of working capital management

GanesanVedavinayagam (2018) studies the impact of working capital management on


profitability through ANOVA test where the financial statements of 349 telecom units or
enterprises are analyzed. The relationship between working capital management efficiency
and profitability and the impact of working capital management on the same has been tested.
At the end of the study the author has minutely observed that the working capital
management efficiency in telecommunication industry is poor. And he suggests that the
telecommunication industry should improve working capital management efficiency.

conversion cycle with corporate profitability. There is shown a positive relation between
numbers of days accounts profitability. The study claimed that managers can create value for
their shareholders by reducing the cash conversion cycle and those more profitable firms wait
longer to pay their bills.

Sanjay J. Bhayani and Butala Ajmera( 2018) In their study – “Receivables Management in
Refinery Industry in India. An Empirical Study “ found that the level of investment in
receivables as a percentage of sales across the industry was reasonably less.
RATIO ANALYSIS

Ratio analysis involves the construction of ratios using specific elements from the
financial statements in ways that help identify the strengths and weaknesses of the
firm. Ratios help measure the relative performance of different financial measures that
characterize the firm's financial health.

TREND ANALYSIS

Trend analysis is a technique used in technical analysis that attempts to predict the future
stock price movements based on recently observed trend data. Trend analysis is based on the
idea that what has happened in the past gives traders an idea of what will happen in the
future.

STATEMENT OF CHANGES IN WORKING CAPITAL

In the preparation of funds flow statement, the first step is to find out the net amount of
increase or decrease of working capital, as increase in net working capital is a use of funds
and decrease in net working capital is a source. Since net working capital is excess of current
assets over current liabilities, the increase or decrease in the net working capital can be found
out by comparing the current assets and current liabilities contained in the balance sheets of
two following dates .For this purpose, a statement is prepared which is called statement or
schedule of changes in net working capital. This statement helps to identify the change in
position of the working capital. While preparing the statement of changes in working capital,
the following points are taken into account.

Increase in current assets , increase in net working capital


Decrease in current assets , decrease in net working capital
Increase in current liabilities , decrease in net working capital
Decrease in current liabilities, increase in net working capital
ABSTRACT NEW

Management of Working Capital is one of the most important functions of corporate


management. Every organization whether public or private, profit oriented or not, irrespective
of its size and nature of business, needs adequate amount of working capital. The efficient
working capital management is most crucial factor in maintaining survival, liquidity,
solvency and profitability of the any business organization. As working capital is defined as
current assets over current liabilities, at the time of determination of working capital, quality
of current assets especially size of debtors and inventory are important factors. Significance
of working capital also increases, as it is directly associated to the liquidity position of the
corporate. However, in some cases, current assets are lower as compared to current liabilities
(known as negative working capital) then how can a firm manage the level of liquidity
Negative working capital arises in cash base business, efficient utilization of resources and
sound inventory management etc., which leads to minimum stock of inventory etc., and the
overall impact is lower level of current assets. On the other hand, due to better contract and
negotiations to the creditors and suppliers, they are extending more liberal credit, which
enhances the level of current liabilities. Study of negative working capital is important to
understand the efficiency of the corporate, which enhances the earning capacity. Keeping in
view the significance of working capital management as a gray area of corporate finance
function, an attempt has been made to examine the working capital trends and practices
particularity in FMCGs sector in India by selecting top two FMCG companies (named as
Hindustan Unilever Limited, Nestle India Limited). The study is based on secondary data i.e.
Annual Reports of the selected companies. The period of study is ten years and traditional
method of data analysis and ratio analysis as tools of financial statement analysis for examine
the degree of efficiency of working capital management has been adopted. Finally, it is found
that companies in which negative working capital exist, profitability is more and shareholders
are getting more dividend and capital appreciation, which maximizes the shareholders’ value
in the long run.