Keywords : Current assets

Cash Conversion Cycle of food and beverage Product industry

Vijayalakshmi S.; Arpanaa S

International Research Journal on Advanced Science Hub, 2021, Volume 3, Issue Special Issue 6S, Pages 37-41
DOI: 10.47392/irjash.2021.162

Working capital is significant because of the effects it has on profitability and value. The conventional relationship between the cash conversion cycle and firm profitability is that reducing the cash conversion cycle improves firm profitability. Shortening the cash conversion time, on the other hand, can hurt the firm's operations and reduce profitability. This may occur when a firm takes steps to shorten the inventory conversion time; when a firm reduces the receivable settlement period, a firm could lose its good credit customers; and when a firm lengthens the payable deferral period, a firm may damage its own credit credibility. Identifying optimum levels of inventory, receivables, and payables where net keeping and opportunity costs are reduced and recalculating the cash turnover time based on these optimal stages, on the other hand, gives more full and precise insights into the performance of working capital management. According to the findings, the chosen firms have a poor average return on asset and return on equity, as well as a slightly negative cash conversion time. After adjusting for heteroskedasticity of data to minimise the effects of outliers, regression results revealed that cash conversion cycle has a significantly positive association with both return on assets and equity, indicating that it is not always necessary that the lower the cash conversion cycle, the greater the profitability measured through return on assets and equity. If the company will sell the goods and recover the receivables before paying the payables, the case would be somewhat different.

Relationship between Working capital and Profitability of Food and Beverage Product Industry

Vijayalakshmi S.; Arul Deepika M

International Research Journal on Advanced Science Hub, 2021, Volume 3, Issue Special Issue 6S, Pages 161-164
DOI: 10.47392/irjash.2021.183

Working capital plays a vital role in a business enterprise, as it helps the companies to maintain enough cash flow to meet its short-term goals and obligations. Working capital or net working capital is the difference between a company’s current assets and its current liabilities. Working capital management is important for Nestle industries, as they deals with anonymous current assets and current liabilities. Data of Nestle India Limited was collected for five years from its secondary source and analysed. The study helps to determine the impact of working capital on the firm’s profitability. Pearson’s correlation analysis was calculated to find the relationship between the firm’s working capital and its profitability. It was found that the relationship was positively correlated between working capital and profitability, and suggested the company to maintain this positive relationship constantly without any further changes.