Working Capital Management in Respect of Automobiles Industry in India

Abstract

In the paper we have made an attempt to examine the practice in working capital management especially profitability ratios, traditional liquidity ratios and cash flow based ratios of the seven selected automobile companies which are large manufacturing and trading public limited companies in the private sector in India. This paper made use of secondary data procured from annual reports of selected Indian automobile companies for the financial year 2008-09. Supplementary information has also been collected from different newspapers, journals, reference books, articles and concerning websites. Statistics was used to analyze the efficiency of the various liquidity measures such as arithmetic mean, standard deviation, correlation, related factors matrix, transformation matrix and canonical discriminant functions. The study is based on hypothesis which are tested by the factor analysis of all three sets of ratios. The result of the study reveals that cash flow based ratios have a better predictive power than other traditional financial ratios.