A study of working capital management and its impact on profitability of Indian automobile sector

Abstract

Working capital is an inherent and important part of financial management. Management of working capital involves two aspects viz. Deployment of resources involving creation of current assets such as inventory, debtors, cash, bank, marketable securities and mobilization of resources involving creation of current liabilities creditors, short term bank loans and other provisions. Each of these aspects call for cost incurrence besides having the potential to generate revenue for the enterprise. The word automobile sector includes passenger cars, commercial vehicles, two wheelers, three wheelers and four wheelers. The history of automobile dates back to 1885 when Karl Benz first built an automobile with petrol engine in Germany. Since then industry has witnessed developments on multiple dimensions be it engine technology, be it engine variants, interiors, exteriors, electricals, electronics, use of artificial intelligence, product market segment and spread across the national boundaries. At present automobile market is characterised by multiple fuel engines with high efficiency, convenient and comfort features, product aesthetics, fierce competition and greater preference to consumer needs. Even the government regulations play increasingly important role in this market. India has produced more than 30 million units of automobile in last year and in the same year India exported automobile worth Rs. 231000 crores. The performance of India in this sector is preceded by few developed countries such as USA, Japan, China and Germany. At present automobile sector contributes 7.1% of GDP and the government of India aims it to increase to 12 %. It provides employment to 37 million people at present and expected to reach 50 million marks newlineby 2030. newline