The Relationship between Working Capital Management and Profitability: A Study of IT Companies in India (2020–2024)

Abstract

This study examines the impact of working capital management (WCM) on the profitability of Indian Information Technology (IT) companies during the period 2020–2024. Using a balanced panel dataset of 12 listed IT companies, the paper employs a random effects model to analyze the relationship between components of working capital (inventory turnover, receivables days, payables days, and current ratio) and profitability (measured by Return on Assets - ROA). The findings suggest a significant relationship between efficient working capital practices and improved profitability, offering practical implications for financial managers in the IT sector.