Working Capital Management

Impact of Working Capital Management in the Profitability of Hindalco Industries Limited J P Singh* and Shishir Pandey** For the successful working of any business organization, fixed and current assets play a vital role. Management of working capital is essential as it has a direct impact on profitability and liquidity. An attempt has been made in this paper to study the working capital components and the impact of working capital management on profitability of Hindalco Industries Limited. The paper also makes an attempt to study the correlation between liquidity, profitability and Profit Before Tax (PBT) of Hindalco.

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The study is based on secondary data collected from annual reports of Hindalco for the study period 1990 to 2007. The ratio analysis, percentage method and coefficient of correlation have been used to analyze the data. Multiple regressions were used to check the significant impact on the profitability of Hindalco. Introduction A successful commercial organization needs two types of assets, viz. , fixed assets and current assets. Fixed assets include—land, building, plant, machinery, furniture, etc. These are not only purchased for the purpose of sale, but also for the purpose of earning profit for many years.

Current assets include, raw materials, work-in-progress, finished goods, sundry debtors, bills receivables, cash, bank balance, etc. These are purchased for the purpose of production and sales, like raw material into semi finished products, semi finished products into finished products, finished products into debtors and debtors transferred into cash or bills receivables. The fixed assets are used in increasing production of an organization and the current assets are used in using the fixed assets for day to day working. The management of this working capital is known as working capital management.

The term working capital refers to the amount of capital which is readily available to an organization. Management of working capital deals with the problems that arise in managing the current assets, the current liabilities and the interrelationship that exists between them. It should neither be inadequate nor excessive. Working capital is an important part of finance having a decisive influence on the liquidity, which is regarded as the lifeblood of a business. It plays a pivotal role in keeping * Reader, Faculty of Commerce, Banaras Hindu University, Varanasi 05, India. E-mail: jpsingh. [email protected] om * * Research Scholar, Faculty of Commerce, Banaras Hindu University, Varanasi 05, India. E-mail: shishir. [email protected] com 62 © 2008 The Icfai University Press. All Rights University Journal of Financial Economics, Vol. VI, No. 4, 2008 The Icfai Reserved. the wheels of a business moving. Working capital management has always been a fascinating subject from the academic point of view and it must be admitted that in a real world situation, the efficiency with which working capital is managed in an organization, is of great significance for its overall well being. Literature Review An enterprise requires fixed as well as working capital.

Firms can minimize their investments in fixed assets by renting or leasing plant and equipment, but they cannot avoid investment in current assets. A firm can exist and survive without making profit but cannot survive without working capital. Thus, working capital management is important because of its effect on the firm’s profitability and risk and consequently its value (Smith, 1980). The literature of finance traditionally focused on long term financial decisions. There has been a concerted effort by theoretical economists to analyze financial decisions of business firms within the context of the equilibrium models of financial markets.

While these models have been employed to analyze the long term corporate investment and financial decisions, virtually no research has been conducted in an attempt to apply them to working capital decisions (Cohn and Pringle, 1975). The literature of finance has neglected the short term financial decisions, which is working capital management. Shortage of funds for working capital as well as the uncontrolled over-expansion of working capital has caused many businesses to fail and in less severe cases has stunted their growth (Grass, 1972).

Especially, in small firms, working capital management may be the factor that decides success or failure; in larger firms, efficient working capital management can significantly affect the firm risk, return and share (Gitman, 1982). Researchers have particularly offered studies analyzing investments, capital structure, dividends and company valuation. However, the investment that firms make in current assets and the resources used with maturities one year represent the main share of items on a firm’s balance sheet which appears to have been relatively neglected in research.

Working capital management is the management of current assets and current liabilities. Maintaining high inventory levels reduces the cost of possible interruption in the production process or of loss of business due to the scarcity of products, reduces supply costs and protects against price fluctuations among other advantages (Blinder and Manccini, 1991). Granting trade credit favors the firms sales in various ways. Trade credit can act as an effective price cut (Brennan et al. , 1988; and Petersen and Rajan, 1997) and an incentive to customers to acquire merchandise at times of low demand (Emery, 1987).

However, firms that invest heavily in inventory and account receivable can suffer low profit. Thus, greater the investment in current assets, lower is the risk, and profitability obtained. Similarly, trade credit is a spontaneous source of financing that reduces the amount required to finance the sums tied up in the inventory and account receivables. The trade credit can have a very high implicit if early payment discounts are available. In fact, the opportunity cost may exceed 20 percentage depending on the discount percentage and the discount period granted (Ng et al. , 1999; and Wilner, 2000).

Impact of Working Capital Management in the Profitability of Hindalco Industries Limited 63 Profitability and liquidity comprise the salient and all too often conflicting goals of working capital management. The conflict arises because the maximization of the firm’s returns could seriously threaten liquidity, and on the other hand, the pursuit of liquidity has a tendency to dilute returns. Over the years, analysts have employed traditional ratio analysis as a primary instrument in the measurement of corporate liquidity in the firm, of well established ratios such as the current and quick ratios (Smith, 1997).

More recently, a popular measure of working capital management is the cash conversion cycle, i. e. , the time lag between the expenditure for the purchase of raw materials and the collection of sales of finished goods. As the time passes, the need for working capital increases. The corporate profitability increases with longer cash conversion cycle and might also decrease if the cost of investment in working capital is higher and rises faster than the benefits of holding more inventories and granting more inventories and trade credit to customers.

Objectives of the Study In this study an attempt has been made to analyze the size and composition of working capital and whether such an investment has increased or decreased over a period of time. After determining the requirements of the current assets, one of the important tasks of the financial manager is to select an assortment of appropriate sources of finance for the current assets. Normally, the surplus of current assets to current liabilities should be financed by long-term sources.

Precisely it is not possible to find out which long-term source has been used to finance current assets, but it can be examined as to what proportion of current assets has been financed by the long-term funds. Therefore, an attempt has been made in this regard. In working capital analysis, the direction of change over a period of time is of crucial importance. Not only that, analysis of working capital trends provides a base to judge whether the practice and prevailing policy of the management with regard to working capital is good enough or an improvement is to be made in managing the working capital funds.

Hence in this study, an attempt is made to know the trend of the working capital management of the selected enterprise. In addition, to have higher profitability, the firms may sacrifice solvency and maintain a relatively low level of current assets. When the firms do so, their profitability will improve, as less funds are tied up in the idle current assets, but their solvency will be threatened. Hence, an attempt is made to study the association of profitability with the working capital ratios.

With this end in view, an effort has been made in this article to make an in-depth study of Hindalco Industries Limited, in respect of its performance and its working capital management. The findings of this study not only throw light on technical weakness in the managerial activities of the companies, but may also help scholars and researchers to develop new ideas, techniques and methods in respect of the management of working capital. Collection of Data and Methodology This study is based on secondary data. The data required for this study have een extracted from the annual reports of Hindalco Industries Limited. The study covers a period of 64 The Icfai University Journal of Financial Economics, Vol. VI, No. 4, 2008 18 years starting from 1989-90 to 2006-07. It covers mainly the following aspects of working capital analysis: (i) Component of Working Capital; (ii) Financing of Working Capital; (iii) Trends of Working Capital; and (iv) Working Capital Impact on Profitability. Statistical techniques namely coefficient of correlation and multiple regression are used for analyzing the data.

In this study, for the purpose of establishing definite relationships between working capital ratios and profitability ratio, correlation analysis has been applied. It implies interdependence of the set of variables. Further, in order to identify the influence of profitability, a linear multiple regression model were used. In the analysis, working capital ratios, viz. , Current Ratio (CR), Liquid Ratio (LR), Working Capital Ratio (WTR), Inventory Turnover Ratio (ITR), Receivables Turnover Ratio (RTR) and Working Capital to Total Assets (WC/TA) are taken as independent variables.

The Profit Before Tax (PBT) to total assets ratios are used as dependent variables. The multiple regression equation used is: PBT/TA = a + b1 CR + b2 LR + b3 WTR + b4 ITR + b5 RTR + b6 TC in S + b7 WC/TA + e where, a, b1, b2, b3, b4, b5, b6 and b7 are parameters to be estimated. Results Working Capital Analysis Table 1 shows that the size of current assets increased from Rs. 1,938. 96 mn in 1990 to Rs. 77,783. 40 mn in 2007, the increase being approximately 40 times. Moreover, the increase in current assets has been regular throughout the period except 1994, 1998 and 2001 when it fell.

In 1994, there was decrease in cash and bank, inventory and sundry debtors, in 1998 decrease in loans and advances and in 2001 decrease in cash and bank, and loans and advances. The table also indicates that on an average, 26. 68% of the total assets of the company are current assets. This signifies that during this period a sufficient portion of total Table 1: Components of Working Capital (Rs. in mn) Year 1990 1991 1992 1993 1994 Cash and Bank 144. 07 (7. 43) 88. 13 (4. 12) 96. 26 (3. 17) 263. 35 (6. 77) 191. 53 (5. 08) Inventory 828. 44 (42. 73) 959. 13 (44. 86) 1,123. 29 (37. 02) 1,443. 63 (37. 10) 1,427. 07 (37. 82) Sundry Debtors 258. 6 (13. 33) 324. 04 (15. 15) 781. 17 (25. 75) 721. 94 (18. 55) 455. 73 (12. 08) Loans and Advances 707. 99 (36. 51) 766. 89 (35. 87) 1,033. 36 (34. 06) 1,462. 70 (37. 59) 1,699. 02 (45. 03) Other CA _ _ _ _ _ Total 1,938. 96 (100) 2,138. 19 (100) 3,034. 08 (100) 3,891. 62 (100) 3773. 35 (100) Ratio of CA to TA 38. 80 34. 11 40. 38 21. 22 18. 33 (Contd… ) Impact of Working Capital Management in the Profitability of Hindalco Industries Limited 65 Table 1: Components of Working Capital Cash and Bank 228. 78 (3. 95) 343. 24 (4. 36) 259. 59 (2. 86) 410. 59 (4. 91) 1,086. 44 (9. 87) 3327. 35 (22. 66) 2,658. 08 (20. 13) 3,870. 28 (23. 35) 3,031. 2 (10. 91) 2,313. 78 (7. 96) 4,009. 69 (8. 96) 9,172. 85 (12. 56) 6,654. 96 (8. 56) Sundry Debtors 408. 93 (7. 06) 668. 5 (8. 48) 1,004. 62 (11. 09) 1,211. 55 (14. 49) 1,638. 71 (14. 89) 1,854. 60 (12. 63) 2,172. 92 (16. 46) 2,731. 79 (16. 48) 5,607. 41 (20. 19) 5,611. 13 (19. 29) 7,873. 67 (17. 59) 12,484. 01 (17. 09) 15,045. 02 (19. 34) Loans and Advances 3,518. 28 (60. 71) 5,031. 57 (63. 85) 5,336. 53 (58. 88) 3,974. 78 (47. 52) 5,124. 27 (46. 56) 6,218. 45 (42. 35) 4,899. 00 (37. 10) 6,199. 13 (37. 41) 9,112. 46 (32. 81) 9,245. 01 (31. 79) 8,713. 49 (19. 47) 7,972. 41 (10. 92) 11,742. 20 (15. 10) Other CA _ _ _ _ _ _ _ _ _ _ 422. 2 (0. 94) 2,447. 34 (3. 35) 1,188. 08 (1. 53) (… contd) (Rs. in mn) Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Note: Inventory 1,639. 15 (28. 28) 1,836. 41 (23. 31) 2,461. 95 (27. 17) 2,767. 21 (33. 08) 3,156. 72 (28. 68) 3,283. 28 (22. 36) 3,473. 54 (26. 31) 3,771. 75 (22. 76) 10,022. 22 (36. 09) 11,913. 43 (40. 96) 23,745. 18 (53. 04) 40,950. 88 (56. 08) 43,153. 14 (55. 48) Total 5,795. 14 (100) 7,879. 72 (100) 9,062. 69 (100) 8,364. 13 (100) 11,006. 14 (100) 14,683. 68 (100) 13,203. 54 (100) 16,572. 95 (100) 27,773. 51 (100) 29,083. 35 (100) 44,764. 25 (100) 73,027. 49 (100) 77,783. 40 (100)

Ratio of CA to TA 21. 07 24. 23 25. 13 19. 80 19. 17 24. 33 19. 78 22. 18 26. 99 25. 30 29. 62 38. 65 31. 19 Figures in brackets show the percentage to total, TA – Total Assets, CA – Current Assets. Source: Computed from Annual Reports of Hindalco Industries Limited. investment of Hindalco has been made on the working capital. The share of current assets to total assets was 38. 80% in 1990 and 31. 19% in 2007. The share of current assets to total assets shows the trend of fluctuation during the period. A component-wise analysis of working capital was also done to trace the factors responsible for the significant change in different years.

From the table, it is evident that two components namely inventory, loans and advances contributed an average of 36. 28% and 38. 53% respectively towards the gross working capital, whereas cash and bank, sundry debtors and other current assets contributed 9. 31%, 15. 55% and 1. 94% respectively. The share of different component of current assets during the study period shows a fluctuation trend in Hindalco. 66 The Icfai University Journal of Financial Economics, Vol. VI, No. 4, 2008 Financing of Working Capital To meet the financial requirement, a business firm has various sources.

A combination of long-term and short-term financing are normally supported to current assets. In Table 2, an attempt has been made to explain the relative importance of long-term and short-term debt in financing working capital. It is evident from the table that the percentage of the long-term funds used for financing the working capital has shown a fluctuating trend during the period under study. It decreased from 30. 14% in 1990 to 17. 94% in 2007. During the study period, long-term source for working capital has been fluctuating in nature, it was at peak during 1991-1992, which was 30. 74% and lowest during 1993-1994 which was 14. 0%. Table 2: Financing of Working Capital (Rs. in mn) Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Gross Working Capital 1,938. 96 2,138. 19 3,034. 08 3,891. 62 3,773. 35 5,795. 14 7,879. 72 9,062. 69 8,364. 13 11,006. 14 14,683. 68 13,203. 54 16,572. 95 27,773. 51 29,083. 35 44,764. 25 73,027. 49 77,783. 40 Sources of Working Capital LT 1,319. 35 1,447. 93 1,988. 16 2,919. 73 2,852. 45 4,576. 36 6,338. 92 7,058. 66 6,281. 83 8,851. 30 12,408. 69 10,241. 20 13,032. 45 19,233. 22 18,325. 39 19,582. 32 41,500. 21 37,508. 20 ST 619. 61 690. 26 1,045. 92 971. 89 920. 9 1,218. 8 1,540. 80 2,004. 03 2,082. 30 2,154. 84 2,274. 99 2,962. 34 3,540. 50 8,540. 29 10,757. 96 25,181. 93 31,527. 28 40,275. 20 Total Long-Term Fund 4,377. 95 5,577. 92 6,468. 37 17,370. 06 19,667. 08 26,282. 96 30,978. 06 34,052. 77 40,166. 04 55,244. 90 58,086. 79 63,802. 86 71,194. 22 94,351. 45 104,176. 25 125,962. 73 157,430. 49 209,124. 39 % of LT Used for Working Capital 30. 14 25. 96 30. 74 16. 81 14. 50 17. 41 20. 46 20. 73 15. 64 16. 02 21. 36 16. 05 18. 31 20. 38 17. 59 15. 55 26. 36 17. 94 Note: LT – Long-Term, ST – Short-Term. Source: Various Annual Reports of Hindalco Industries Limited. Working Capital Trend

Working capital trends provide a base to judge whether the practice and prevailing policy of the management with regard to working capital is good enough or an improvement is Impact of Working Capital Management in the Profitability of Hindalco Industries Limited 67 to be made in managing the working capital funds. The trend of working capital of Hindalco Industries Limited is presented in Table 3. It is evident from the table that the working Table 3: Original and Trend Value of Working Capital (Rs. in mn) Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Original Working Capital 1,319. 35 1,447. 3 1,988. 16 2,919. 73 2,852. 45 4,576. 36 6,338. 92 7,058. 66 6,281. 83 8,851. 30 12,408. 69 10,241. 20 13,032. 45 19,233. 22 18,325. 39 19,582. 32 41,500. 21 37,508. 20 Trend Value –4336. 04 –2417. 64 –499. 24 1,419. 16 3,337. 56 5,255. 96 7,174. 36 9,092. 76 1,1011. 16 12,929. 56 14,847. 96 16,766. 36 18,684. 76 20,603. 16 22,521. 56 24,439. 96 26,358. 36 28,276. 76 Source: Computed from Annual Reports of Hindalco Industries Limited. Figure 1: Working Capital: Original and Trend Value 50,000 40,000 Rs. in mn 30,000 20,000 10,000 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 –10,000 Year Original Working Capital Trend Value 8 The Icfai University Journal of Financial Economics, Vol. VI, No. 4, 2008 capital of Hindalco marked an increasing trend during the period under review except in 1994, 1998, 2001, 2004 and 2007. The net working capital of Hindalco increased to Rs. 37,508. 20 mn in 2007 from Rs. 1,319. 35 mn in 1990. The linear least square trend values of working capital in Hindalco are shown in Table 3. The yearly increase in working capital comes to Rs. 1918. 4 mn. The difference between actual and trend values were negative in the years 1994 to 2005 while they were positive in the remaining years.

Figure 1 shows that the working capital increased to Rs. 41,500. 21 mn in 2006 from Rs. 19,582. 32 mn in 2005 (more than twice); it was the biggest gap between two years working capital values. Impact of Working Capital on Profitability In the judgment of the liquidity position and its impact on profitability, it is necessary to analyze the different working capital ratios as exhibited in Table 4. It appears from the table Table 4: Impact of Working Capital on Profitability Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Coefficient Correlation CR 3. 13 3. 10 2. 90 4. 0 4. 10 4. 75 5. 11 4. 52 4. 02 5. 11 6. 45 4. 46 4. 68 3. 25 2. 70 1. 78 2. 32 1. 93 0. 1531 LR 1. 79 1. 71 1. 83 2. 52 2. 55 3. 41 3. 92 3. 29 2. 69 3. 64 5. 01 3. 28 3. 62 2. 08 1. 60 0. 83 1. 02 0. 86 0. 1867 WTR 3. 04 3. 12 2. 85 2. 19 2. 07 1. 45 1. 34 1. 09 1. 56 1. 36 1. 14 1. 56 1. 26 2. 28 2. 92 4. 18 2. 35 4. 20 –0. 0215 ITR 5. 42 5. 05 5. 44 4. 98 4. 11 4. 33 4. 90 3. 57 3. 74 4. 05 4. 41 4. 73 4. 54 6. 37 4. 88 4. 60 3. 01 3. 75 0. 1433 RTR 18. 01 15. 93 8. 38 10. 46 16. 45 23. 39 18. 73 11. 52 12. 16 10. 78 10. 95 10. 47 8. 53 8. 87 11. 03 12. 10 9. 13 12. 17 0. 4128 Turnover of Cash in Sales 19. 1 35. 83 74. 25 78. 46 28. 46 49. 93 54. 72 33. 71 56. 75 43. 04 18. 70 6. 84 8. 77 12. 86 20. 42 41. 16 28. 42 19. 96 0. 2522 WC/ TA 0. 26 0. 23 0. 26 0. 16 0. 14 0. 17 0. 19 0. 20 0. 15 0. 15 0. 21 0. 15 0. 17 0. 19 0. 16 0. 13 0. 22 0. 15 0. 5965 PBT to TA 0. 19 0. 16 0. 20 0. 10 0. 11 0. 16 0. 20 0. 14 0. 14 0. 12 0. 15 0. 15 0. 13 0. 09 0. 11 0. 13 0. 11 0. 14 – Note: CR – Current Ratio, LR – Liquid Ratio, WTR – Working Capital Ratio, ITR – Inventory Turnover Ratio, RTR – Receivables Turnover Ratio, WC/TA – Working Capital to Total Assets, PBT to TA – Profit Before Tax to Total Assets.

Source: Computed from Annual Reports of Hindalco Industries Limited. Impact of Working Capital Management in the Profitability of Hindalco Industries Limited 69 that the current ratio of Hindalco has moved between 1. 93 to 6. 45 during the period of study. On an average, it stands at 3. 80 for the entire period. Conventionally, a standard of 2:1 is considered satisfactory. It is thus, discerned, that the liquidity of Hindalco, as measured by current ratio is satisfactory. This signifies that the margin of safety available to short term creditors is relatively high, i. e. for every rupee of current liability the cushion available is Rs. 2. 80. The coefficient of correlation between the profitability ratio and current ratio of Hindalco is 0. 1531. This indicates that there is low degree of positive correlation between these two variables. The liquid ratio of Hindalco has moved between 0. 83 to 5. 01 during the entire period of study which is moderately good, as compared to the standard norm of 1:1, except in the year 2005 and 2006. The coefficient of correlation between profitability ratio and liquid ratio and inventory turnover ratio are low degree positive correlation.

The coefficient of correlation between the two variables, the correlation between profitability ratio and working capital turnover ratio indicates low degree of negative correlation of –0. 0215, whereas the correlation between profitability ratio and receivables turnover ratio, turnover of cash in sales ratio and working capital to total assets, indicate moderate positive coefficient correlation of 0. 4128, 0. 2522 and 0. 5965 respectively. Thus, the correlation analysis showed that CR, LR, ITR, RTR, TC and WC/TA have shown positive correlation with profitability ratio and only WTR has shown negative correlation with profitability ratio.

Multiple Regression Analysis In Table 5, the impact of working capital ratios on profitability of Hindalco is shown with the help of multiple regression analysis. The table shows that the impact of current ratio, Table 5: Multiple Regression Analysis Variables Constant CR LR WTR ITR RTR Turnover of Cash in Sales WC/TA Standard Error of Estimate (SEE): Coefficient of Determination (R-Squared): Beta Coefficient Value 0. 0382 –0. 0942 0. 1178 0. 0188 –0. 0070 0. 0036 0. 0040 0. 5214 Std. Error 0. 06370 0. 03150 0. 03290 0. 00109 0. 00640 0. 00120 0. 0020 0. 12100 t-Value 0. 5997 2. 9877 3. 5867 1. 7188 1. 1961 2. 9951 1. 7572 4. 3101 0. 0185 0. 8102 p-Value 0. 2810 0. 0068 0. 0025 0. 0582 0. 1296 0. 0067 0. 0547 0. 0008 Source: Computed from Annual Reports of Hindalco Industries Limited. 70 The Icfai University Journal of Financial Economics, Vol. VI, No. 4, 2008 liquid ratio, receivables turnover ratio and working capital to total assets ratio were statistically significant as seen from the values of the regression coefficient. For a unit increase in current ratio, profitability decreased by 0. 942 unit which was statistically significant at 5% level. Similarly, one unit increase in liquid ratio would increase the profitability by 0. 1178 units, which is also statistically significant at 5% level. The coefficient of regression between the profitability ratio and receivables turnover ratio is computed as 0. 0036, which implies that one unit increase in receivables turnover ratio would increase the profitability ratio by 0. 0036 unit and this coefficient is also statistically significant at 5% level.

It is also inferred from the table that one unit increase in working capital to total assets ratio would increase the profitability ratio by 0. 5214 units. The independent variables explain 81% of the variations in the profitability of Hindalco. Thus, the overall results presented in the table are satisfactory. Conclusion The current assets of Hindalco have witnessed a steady growth over the past years which were 40 times more in 2007 in comparison to that of 1990. This increase was mainly supported by inventory and loans and advances.

Our study also shows that the contribution of long term source in working capital is below 30% in all the study period. It has also been found that during the study period, except 1994, 1998, 2001, 2004 and 2007 the working capital of Hindalco has registered an increasing trend. Regression results of the study show that current ratio, liquid ratio, receivables turnover ratio and working capital to total assets ratio have statistically significant impact on the profitability of Hindalco Industries Limited. O References 1. Blinder A S and Maccini L J (1991), “The Resurgence of Inventory Research: What Have We Learned? , Journal of Economic Survey, Vol. 5, No. 4, pp. 291-328. 2. Brennan M, Maksimovic V and Zechner J (1988), “Vendor Financing”, Journal of Finance, Vol. 43, No. 5, pp. 1127-1141. 3. Cohn R A and Pringle J J (1975), “Steps Towards an Integration of Corporate Financial Theory”, in Keith V Smith (Ed. ), Management of Working Capital: A Reader, p. 369, West Publishing Company, New York. 4. Emery G W (1987), “An Optimal Financial Response to Variable Demand”, Journal of Financial and Quantitative Analysis, Vol. 22, No. 2, pp. 209-225. 5.

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Bibliography 1. Annual Reports of HINDALCO Industries Limited, From 1989-1990 to 2006-2007. 2. Deloof M (2003), “Does Working Capital Management Affect Profitability of Belgian Firms? ”, Journal of Business, Finance and Accounting, Vol. 30, pp. 575-587. 3. Maheshwari S N (1996), Management Accounting and Financial Control, Sultan Chand & Sons, New Delhi. 4. Pandey I M (2005), Financial Management, 9th Edition, Vikas Publishing House, New Delhi. Reference # 42J-2008-12-04-01 72 The Icfai University Journal of Financial Economics, Vol. VI, No. 4, 2008

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