A Study On Working Capital Management And Its Impact On Profitability At Prasanna Precision Tools

Abstract

The Study Titled “A Study On Working Capital Management And Its Impact On Profitability” Focuses On Analyzing The Efficiency Of Working Capital Management And Its Influence On The Profitability Of Prasanna Precision Tools, Puducherry. The Research Is Based On Secondary Data Collected From The Company’s Financial Statements For A Five-year Period. Analytical Tools Such As Ratio Analysis And Regression Analysis Were Applied To Examine The Relationship Between Liquidity And Profitability. The Results Reveal That Inventories And Receivables Constitute The Major Portion Of Current Assets, While Cash Balances Remain Consistently Low. Liquidity Ratios Such As The Current Ratio And Quick Ratio Show A Declining Trend, Indicating A Gradual Reduction In The Firm’s Ability To Meet Short-term Obligations. Despite This, Profitability Ratios Such As Gross Profit Margin And Net Profit Margin Remained Stable, Showing Efficient Cost Control. The Regression Analysis Indicates A Strong Relationship Between Working Capital And Profitability, Though Excessive Liquidity Was Found To Negatively Impact Returns. The Study Concludes That Effective Working Capital Management Is Essential For Balancing Liquidity And Profitability. It Recommends Improving Receivable Collections, Optimizing Inventory Levels, And Reducing Reliance On Short-term Borrowings To Strengthen Financial Stability And Ensure Sustainable Profitability.

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