Study reveals poor liquidity management impacting agro-processing firms' financial health.
Working capital management is crucial for businesses to stay financially healthy. A study analyzed data from an agro-processing and trading firm over 10 years to see how well they managed their working capital. The researchers used ratio analysis to look at current assets, liabilities, and other financial factors. They found that the firm's liquidity position was not strong, making it hard to pay off debts on time. However, the efficiency of their working capital management improved over time. Inventory turnover and working capital turnover were linked to higher returns on assets. Additionally, a higher working capital turnover ratio was associated with a better net profit margin, while a higher debtors' turnover ratio was linked to a lower net profit margin.