How to Manage Working Capital- An Empirical Study of Maruti Suzuki India Limited

Abstract

Efficient liquidity management involves planning and controlling current assets and current liabilities in such a manner that eliminates the risk of the inability to meet due short term obligations on the one hand and avoids excessive investments in these assets on the other. This is, due in part, to the reduction of the profitability of running out of cash in the presence of liquid assets. The working capital approach to liquidity management has long been the prominent technique used to plan and control liquidity. The working capital includes all the items shown on a company's balance sheet as short term or current assets, while net working capital exclude current liabilities. This measure is considered a useful tool in assessing the availability of funds to meet current operations of companies. Based on this theoretical background, this research paper evaluates the liquidity, profitability and risk trade-off of Maruti Suzuki India Limited (MSIL), a premier car manufacturer and the biggest seller in India