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Stream/Area:
-
Subject:
-
Paper ID:
IJSREM66251
Volume:
10 |
7 |
Jul 2026
Pages:
1-13
Publication Frequency:
Monthly (12 issues per year)
License:International Journal of Scientific Research in Engineering and Management follows the Creative Commons Attribution 4.0 (CC BY 4.0) License, allowing free use and distribution with proper attribution.
Management Studies
Visvesvaraya Technological University – Belagavi
Management Studies
Visvesvaraya Technological University – Belagavi
This research examines the intricate relationship between working capital management efficiency and corporate profitability within the Indian automation manufacturing sector across a comprehensive five-year period from 2019 to 2024. Through rigorous empirical analysis of 45 publicly listed automation manufacturing firms, this study investigates how various components of working capital including cash conversion cycles, inventory turnover periods, receivables collection periods, and payables deferral periods influence firm profitability metrics such as return on assets, return on equity, and net profit margin. The findings reveal statistically significant negative correlations between prolonged cash conversion cycles and profitability indicators, suggesting that firms with more efficient working capital management consistently demonstrate superior financial performance. Furthermore, the research identifies sector-specific optimal thresholds for working capital components that balance liquidity requirements against profitability objectives. The study contributes to existing literature by providing contemporary empirical evidence from an emerging economy context, offering actionable insights for financial managers, and establishing benchmarks for working capital efficiency in the automation manufacturing industry. These findings carry substantial implications for corporate financial strategy, particularly concerning inventory optimization, credit policy formulation, and payables management in technology-driven manufacturing environments.
KEYWORDS
This research provides comprehensive empirical evidence regarding the relationship between working capital efficiency and profitability in the Indian automation manufacturing sector. The findings conclusively demonstrate that efficient working capital management, characterized by shorter cash conversion cycles, significantly enhances firm profitability across multiple metrics including return on assets, return on equity, and net profit margin. The disaggregated analysis reveals that inventory conversion period and receivables collection period exhibit stronger negative associations with profitability compared to payables deferral period, which demonstrates a positive albeit weaker relationship. The identification of optimal threshold levels for working capital components reveals important non-linearities in the working capital-profitability relationship, suggesting the existence of an optimal working capital level that balances efficiency benefits against potential operational disruptions. Firm size emerges as a significant moderating factor, with larger firms demonstrating stronger profitability benefits from working capital efficiency improvements.
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Publication Date
7/20/2026
Peer Review Type
Double-Blind Peer Review
Review Rounds: 2
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