Working Capital Strategies and Financial Performance of Non-Financial Firms Listed in BSE SENSEX

Abstract

The main aim of our study is to assess the influence of working capital investment and financing strategy on the return of non-financial enterprises listed in BSE SENSEX over 15 years from 2005-2006 to 2019-2020. While studying the impact, descriptive statistics, correlation analysis, and ordinary least square have been used. In order to test the stationary in the time series data, the Augmented Dickey-Fuller test has been used to determine whether or not a particular time series is stationary. The study found that the companies listed in BSE SENSEX follow a moderate policy for managing their working capital. This means that these companies use a relatively small portion of their current assets and current liabilities to finance their overall capital. The study found a negative correlation between the level of aggressiveness in a company's working capital investment policy and its success. The study proposes that companies listed in the BSE SENSEX should fund their assets using short-term obligations rather than long-term borrowing. This can be attributed to the fact that current liabilities are more cost-effective than long-term borrowing. The study suggests that companies listed on the BSE SENSEX should increase the ratio of current assets to total assets and raise the share of current liabilities in their overall capital in order to enhance their financial performance.