Working Capital Management and Profitability: With Special Evidence from Agriculture Companies Listed on the National Stock Exchange

Abstract

The study attempted to analyze the relationship between working capital management (WCM) and the profitability of agriculture companies. The data were collected from four agricultural companies listed on the National Stock Exchange during 2013-2021. The results showed that RCC and CCC had a significant negative relationship with the ROA of agriculture companies. The negative relationship implied that profitability was lower if the cash conversion cycle was longer. The study concluded that a reduction in the receivables collection cycle and cash conversion cycle could lead to an enhancement in the profits of the agriculture company. The findings also highlighted the significant positive impact of ICC and PDC on the ROA of agriculture companies. It implied that longer the duration of the inventory conversion period and payment to suppliers led higher profitability for the companies. Therefore, to maintain a specific level of inventories for proper working capital management and improved profitability, agricultural companies should invest in current assets with the help of a financial institutional support system. Policymakers could develop regulations to encourage the amount of current assets in the working capital of agricultural companies, leading to profitability.