Implications of Working Capital Management on Profitability: A Case of ONGC Ltd.

Abstract

Financial Management basically deals with raising of financial resources and its proper allocation in order to maximize shareholders wealth. For a successful running of an organization fixed and current assets play a crucial role as organization generally invests in these options. A firm’s working capital consists of its investments in short-term assets like cash and bank balance, inventories, receivable and short term investments. Therefore, the working capital management mainly refers to the management of all these individual current assets. In this research paper an attempt has been made to study the components of working capital and the possible implications of working capital management policies on profitability of ONGC Limited. The paper also attempts to analyze the correlation between liquidity, profitability and return on investments of ONGC. The study is based on secondary data collected from annual reports of ONGC for the period 2000 to 2012. In this paper there is an application of correlation and regression analysis to identify the significant impact of Working capital management on the profitability. Working capital Management is essential as it might have a direct impact on profitability and liquidity.