Analyzing The Impact Of The Cash Conversion Cycle On Profitability Within Indian Corporations
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Abstract
This study delves into the working capital management (WCM) practices within the Indian corporate sector, particularly focusing on the Cash Conversion Cycle (CCC) and its influence on Profit Margin (PM). Two distinct sectors, manufacturing and service, form the crux of this investigation. Utilizing quantitative research methods, secondary data was extracted from the annual reports of ten prominent Indian firms, equally divided between the two sectors. The study sought to identify disparities in CCC between the sectors and understand the correlation between CCC and PM. The findings underscored a palpable difference in WCM practices: manufacturing firms exhibited a prolonged CCC compared to service firms, primarily due to their intricate inventory management needs. Interestingly, a significant negative correlation was observed between CCC and PM, emphasizing that firms with efficient WCM (lower CCC) tend to be more profitable. However, this research is limited by the small sample size and does not account for external factors affecting WCM. Nonetheless, the insights provide a comprehensive understanding of how effective WCM practices, specifically CCC, influence profitability across sectors in the Indian corporate arena.
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References
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