Review of Professional Management

Impact of Working Capital Management on Profitability: A Study of the Select Indian Pharmaceutical Companies

Rachna Mahalwala¹ and Girish Ahuja²

First Published 21 Jul 2023. https://doi.org/10.1177/09728686231184951

Article Information

Volume 21, Issue 1 June 2023

Corresponding Author:

Rachna Mahalwala, Bhagini Nivedita College, University of Delhi, New Delhi, Delhi 110043, India.
Email: rachnamahalwala@gmail.com

¹Bhagini Nivedita College, University of Delhi, New Delhi, Delhi, India

² GD Goenka University, Sohna Rural, Haryana, India

Creative Commons Non Commercial CC BY-NC: This article is distributed under the terms of the Creative Commons Attribution-NonCommercial 4.0 License (http://www.creativecommons.org/licenses/by-nc/4.0/) which permits non-Commercial use, reproduction and distribution of the work without further permission provided the original work is attributed.

Abstract

The smooth running of business operations demands an efficient management of working capital by properly managing the inventory, accounts receivables and accounts payables of the business. This helps companies not only fulfil their short-term financial commitments but also boost their earnings. Therefore, the present study aims at verifying the impact of working capital management on the profitability of the companies under pharmaceutical industry in India. For empirical analysis, the data of 618 pharmaceutical companies is taken over a period of seven years from 2014–2015 to 2020–2021 and multivariate panel data regression technique is applied on data for estimating the results. The findings of the study validate that the profitability of companies is significantly influenced by working capital management. These findings will provide an insight to corporate managers and owners of pharmaceutical companies in deciding appropriate working capital strategy.

Keywords

Working capital, return on assets, fixed effects, random effects

Submitted 20 September 2022; accepted 22 May 2023

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