1.
Arunkumar O.n.
– National Institute Of Technology Calicut, Calicut, Kerala, India
2.
T. Radharamanan
– National Institute Of Technology Calicut, Calicut, Kerala, India
Abstract
Working Capital Management (WCM) is concerned with the
problems that arise in attempting to manage current assets and
current liabilities. This paper analyzes the variables affecting
working capital management of Indian manufacturing firms
using factor analysis. The analysis uses eleven variables as a
combination of working capital ratios and cash flows. The authors
apply principal component analysis to extract the maximum
amount of variance accounted for a minimum number of factors.
The study finds cash conversion cycle to be correlated with the
other variables and eliminated. Net working capital to total assets
ratio has a complex structure, so it is dropped from the analysis.
The factor analysis classifies the nine variables into four factors.
It was obvious from the classification that the factors pertained
to assets, policy, convertibility and operational, which can give a
direction to the decision makers.
