WORKING CAPITAL DYNAMICS AND FINANCIAL PERFORMANCE: A QUANTITATIVE STUDY ON MANAGERIAL PERCEPTION ON CHENNAI-BASED FIRMS

Abstract

This study investigates the relationship between working capital management (WCM) and profitability, focusing on how the effective management of cash, receivables, and payables contributes to a firm’s financial performance. In today’s competitive business environment, maintaining optimal levels of current assets and liabilities is essential for ensuring liquidity and profitability. Data were collected from 398 managerial executives in Chennai, and Structural Equation Modeling (SEM) was used for analysis. The results reveal that cash and receivable management significantly influence WCM. Furthermore, a strong positive relationship was found between WCM and enhanced profitability, underscoring the importance of efficient management of current assets and liabilities. The findings suggest that firms prioritizing liquidity, timely collection, and optimal resource utilization can improve their financial performance. By optimizing working capital components, firms can strengthen financial stability and boost overall profitability. The study offers practical insights for financial managers and policymakers seeking to enhance operational efficiency and long-term sustainability through strategic working capital practices.