International Journal of Applied Research
Vol. 1, Issue 9, Part C (2015)
An impact of negative working capital on profitability – A case study of selected cement companies in India
Mohan Kumar M. S, T Aswathanarayana
Working capital management is a concept that is gaining serious attention all over the world because of the current financial crisis and economic problems. Traditional financial analysts would consider liquidity management of companies playing a vital role to increase profitability and shareholders wealth, and also it shows the ability of a company to meet the short term obligations hence; it is significant to maintain liquidity position of the company as without it the company cannot survive. But in present business scenario many industries are using negative working capital and getting a good amount of profits and good return on capital also. The negative working capital indicates; lower cost of capital, but at the same time, it indicates poor liquidity position & high risk which is not good for any situation. This paper mainly focused on impact of negative working capital on profitability or not. The study covers a period of ten years from 2005 to 2014. The study was concluded as a positive relationship between the negative working capital and profitability and it leads to positive growth in earning per share & Equity dividend rate.
How to cite this article:
Mohan Kumar M. S, T Aswathanarayana. An impact of negative working capital on profitability – A case study of selected cement companies in India. International Journal of Applied Research. 2015; 1(9): 170-173.