Thesis Abstract and Dissertation Abstracts
Working Capital Management of Power Sector Companies In India
Abstract Category: Accounts and Economics
Course / Degree: PhD in Commerce Regd No.15069/06
Institution / University: Magadh University, India
Published in: 2012
Introduction :
Working capital management Involves the relationship between a firm's short-term assets and its short-term liabilities. The goal of working capital management is to ensure that a firm is able to continue its operations and that it has sufficient ability to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable, and cash.
Design/methodology/approach –
The paper includes a conceptual as well as empirical analysis, in which data from a sample of listed firms for the period from 2007 to 2009 are analyzed to examine if more efficient working capital management improves power sector companies’ accounting profitability and firms’ value. Profitability ratios as well as liquidity ratios are used as measures of working capital management skills. In this study, two performance measures are used: accounting and financial measures, believing that firm’s profitability and working capital management in the firms are main concern. To bring up more robust results, this study used more than one estimation technique, including analysis, fixed and random effects, and various trend analysis on working capital and profitability in power sector companies.
Findings
This study found that sufficient working capital is must to manage the firms liquidity and day to day running expenses of the businesses. reasons of low profitability in power sector, there are numerous factors. All these are categorized into (i) External and (ii) Internal. External factors are; (a) excise duty; (b) customs duty and import duty; (c) Income tax; (d) Railway freight; (e) Coal; (f) Huge investment; (g) Poor functioning of SEB, The internal factors are consisting of (i) demand and supply; (ii) Competition; (iii) Off-take by the Government; (iv) docile economic activity; (v) Ineffective management; (vi) labor problems; (vii) financial problems and (viii) low productivity. Besides, there are other factors such as poor quality, low capacity utilization, high expenses of manufacture. High expenses of administration, high debt-equity ratio and poor working capital policy and ill-financial management.
Conclusion :
In connection with working capital planning, over 100 per cent of the financial managers replied that they were using cash forecast methods as supporting to determine the working capital requirements. Further, they answered that for determination of working capital requirements, 6 out of 15 said that the production is the key factor while other emphasized on the sales as the key factor. About the conventional standard current ratio of 2:1, 14 out of 15 replied that they emphasized as ‘great’ while others indicated it as ‘high’. About the quick ratio, the financial managers said that it was the realistic measure of liquid position of the concern. Regarding components of working capital, the executives ranked inventory component as ‘great’ in the list of various components of current assets. Large amount of working capital is used to be blocked in the inventory.
Each component of working capital (namely inventory, receivables and payables) has two dimensions ......TIME...... and MONEY. When it comes to managing working capital - TIME IS MONEY. If you can get money to move faster around the cycle (e.g. collect monies due from debtors more quickly) or reduce the amount of money tied up (e.g. reduce inventory levels relative to sales), the business will generate more cash or it will need to borrow less money to fund working capital. As a consequence, you could reduce the cost of bank interest or you'll have additional free money available to support additional sales growth or investment. Similarly, if you can negotiate improved terms with suppliers e.g. get longer credit or an increased credit limit, you effectively create free finance to help fund future sales.
Paper Keywords/Search Tags:
Magadh University, India
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Submission Details: Paper Abstract submitted by Srinivas Annabathula from India on 15-Aug-2013 16:19.
Abstract has been viewed 2940 times (since 7 Mar 2010).
Srinivas Annabathula Contact Details: Email: asrinivas9999@hotmail.com
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