Analysis of Working Capital Efficiency in Cipla Ltd.

Abstract

Decisions relating to working capital involve managing relationships between a firm’s short-term assets and liabilities to ensure a firm is able to continue its operations, and have sufficient cash flows to satisfy both maturing short-term debts and upcoming operational expenses at minimal costs, increasing firm’s profitability. The working capital very much associate with the operating cycle. A perusal of the operating cycle good reveal that funds invested in the operation are recycled back in to cash. The shorter the period of operating cycle the larger will be the turnover of the funds invested in various purposes. The shorter period of operating cycle shows better efficiency of a firm. The efficiency of working capital management can be determined by the operating cycle of the firm. This paper aims at analyzing the efficiency of working capital management through the relationship between operating cycle period and profitability of Cipla Ltd. To measure the Working Capital Management Efficiency, Operating cycle has been calculated and the relationship is made with Gross Profit Ratio.