Distinguished Competency and Efficacy of Working Capital Management Ensuing Firm Survival, Liquidity, Solvency and Profitability: A Study on Automotive Industry

Abstract

Limited research interest in studying working capital management process, is found in the literature. However, working capital management has been the most crucial determinant factor for any industry’s survival, liquidity, solvency and profitability. Therefore, to tackle efficiently liquidity and profitability trade –off, all industries are compelled to improvise their working capital management strategies. Continuation of working capital management process at optimal level, expedites firm's value creation and also facilitates to design framework in smoothening financial constraints so as to make effective usages of firm’s resources. The paper argues that automotive industry occupies a significant proportion of global economy. Therefore, an effort has been made to undertake an in-depth study on the industry. The study besides identifying the industry leader, explores diverse techniques to advance comparative study on the industry efficiency level in managing working capital process. The research outcome facilitates investors to choose the most commendable automotive companies for investments.

Do competitive strategies affect working capital management efficiency?

“…WCM theory focuses on the dynamic interplay between a company's existing assets and liabilities. Efficient WCM is closely linked to enhanced liquidity, solvency, efficiency, profitability, and maximisation of shareholder equity (Bhattacheryay, 2023). Habib and Kayani (2022) emphasise the importance of efficient WCM to balance different WCM components to mitigate the potential for bankruptcy.…”