Volume : 3, Issue : 6, June - 2014

A Study on Industry Practices Relating To Working Capital Policies

Dr . R. Kavitha, Dr. R. Shanmugam

Abstract :

Working capital plays a vital role in the firm’s operations and requires the efficient management. Most of the companies have informal working capital policy and company size has an influence on the overall working capital policy and approach –conservative, moderate or aggressive. The objective of the study is to analyze the industry practices relating to working capital policies of the selected firm. The data required for the study have been collected from the ‘PROWESS’ of CMIE and Capitaline Plus database of Capital Market Publishers India Pvt. Ltd, Mumbai, India. There are twenty one out of thirty large pharmaceutical firms has been selected for the study for the period of ten years from 2000–01 to 2009–10. Ratio analysis, descriptive statistics, one–way ANOVA, Tukey’s Honestly Significantly Different (HSD) tests, rank order correlation and regression analysis have been used in the analysis. According to the study, pharmaceutical firms are found to follow conservative investment and financing policies. There is no uniformity in the policies of firms even though they belong to same industry. There is a change in policies of all the firms over the period. There is a strong stability in each industry’s relative level of aggressiveness with respect to working capital investment policies over a period of time. It found that there is a negative relationship between working capital policies and profitability