Effects Of Working Capital Management On A Select Set Of Micro Small And Medium Enterprises In West Bengal

Abstract

Among the various sectors in the economy, micro, small, and medium enterprises are playing a significant role in the growth and development of the country. The main purposes of the study are to examine the impact of working capital management on the financial performance of selected Micro, Small, and Medium Enterprises (MSME) in West Bengal. In this study, the financial performance depends on the profitability of the MSMEs, and working capital management is determined based on cash management practices, inventory management practices, receivable management practices, and payable management practices. The entire study is based on the primary data. A closed-ended questionnaire was developed, and 102 MSMEs have been selected for this research through voluntary sampling. Descriptive statistics (which include measurement of central tendency, standard deviation, maximum, and minimum) and inferential statistics (to measure the relationship of the variables) are used to analyze the primary data. Correlation and a single regression model are used to examine the significant impact of the working capital components on MSME s financial performance. The dependent variable is financial performance, and the independent variables are cash management practices, inventory management practices, receivable management practices, and payable management practices. STATA 14.0 software is applied in this study. The results show that the relationship between financial performance with cash management practices (r = 0.9693, plt 0.05), inventory management practices (r = 0.9634, plt 0.05), and receivable management practices (r = 0.9840, p lt 0.05) is significant and has a negative relationship with payable management (r = -0.3325). In a nutshell, if the firm has better cash management, inventory management, and receivable management, then the firm s financial performance will improve, and vice versa for payable management. It has been observed that the working capital components are closely related to the profitability of the firm. As a sugge