Working Capital Management in Auto Industry in India A Study of Selected Auto Companies

Abstract

Working capital is considered as a significant issue in financial decision-making, given that it is being a part of investment in asset which calls for appropriate financing investment. If firm s manager failed to manage it properly then it will affect firm s growth and profitability which will further escort to financial distress and finally firms can go bankrupt. Working Capital has been looked upon as the driving seat of a financial manager. As such the working capital plays the same role in the business as the role of the heart in the human body. Structure of working capital is the study of components of current assets and current liabilities. The main elements of current assets are cash and bank balance, inventory, receivables and other quick resources like short term or temporary investments. Current liabilities include payables, bank overdrafts, and outstanding expenses, tax payable and proposed dividends. newlineThe Indian auto industry is one of the largest in the world. The automobile industry is one of the key drivers that boost the economic growth of the country. Since the de-licensing of the sector in 1991 and the subsequent opening up of 100 percent FDI through automatic route, Indian automobile sector has come a long way. Today, almost every global auto major has set up facilities in the country. Hence the present study is highly relevant for empirically investigating the financial aspects of the Indian auto industry to get a deep insight of the financial performance of the industry. newlineThe present study is based upon objectives of assessing and analyzing the working capital trends in auto-industries in India, to examine the working capital position on the basis of various components of working capital and to measure the extent of relationship between working capital management and profitability. For achieving these objectives of the study, the information is collected from annual reports of the selected auto-companies, Economic Survey of India of different years, research publications, journals, websites, B