Relationship Between Working Capital Management and Profitability of Indian Automobile Manufacturers

The relationship between working capital management and profitability of Indian vehicle manufacturers is examined in this article for the period 2006–2020. The research is essential for investors, competitors, policymakers, and companies at the time since that operates as a growth direction. Thus, it is believed that a well-designed and managed working capital management system would contribute favorably to the profitability and value of the business. Efficient working capital management is crucial for every company organization's existence, liquidity, solvency, and profitability. Additionally, effective working capital management adds value to any business. To compete in a highly complicated and dynamic market, it is difficult for businesses to maximise their working capital as a true competitive advantage for profit leverage. To manage working capital optimally, the manager must carefully control the link between profitability and working capital components. As such, this study aims to quantify the link between working capital management and profitability for four Indian automotive passenger vehicle manufacturers included on the CMIE database. Multiple Backward Step Regression is used to analyse and derive conclusions from the data. The current asset turnover ratio was used as a dependent variable, whereas the components of working capital were used as independent variables. Additionally, the selling growth rate, business size, leverage, and age all have an effect on a firm's profitability. As a result, this article gives managers with new insight into how to increase their firm's profitability through effective working capital management.