Impact of Working Capital Management on the Profitability of Automobile Industry in India-An Empirical Study of Selected Automobile Companies

Working capital management is the discipline of management which is inevitable in all walks of economic life whether in a household or in an enterprise, in the public domain or in private domain, profit oriented or not. The efficient working capital management is most crucial factor in maintaining survival, liquidity, solvency and profitability of any business organization. Moreover, an optimal working capital management positively contributes to the firm's value. Theprofitability and the efficiency of every sector in the nation have direct bearing on the prosperity of economy which can be primarily achieved through efficient working capital management practices. It helps in designing a framework to smoothen the financial constraints of business so as to make effective use of its resources. Keeping in mind the significance of working capital management an attempt has been made to examine its impact on the profitability of Indian automobile industry. The Indian automobile industry is one of the largest in the world with an annual production of 23.36 million vehicles in FY 2014-15. The Automobile industry accounts for 22 per cent of the country's manufacturing gross domestic product (GDP). For the purpose of this research paper threeIndian Automobile company namely Tata motors ltd., Maruti SuzukiIndia ltd and Mahindra & Mahindra ltd. are taken, as these are the giants companies in Indian Automobile industry and plays a pivotal role in growth of Indianeconomy. For analyzing the result ROCE is used as dependent proxy variable for profitability. Whereas CR, DTR, ITR are used as independent proxy variable for substantiating the impact of working capital management on the profitability of companies.