Impact of inventory holding period on profitability: A study of cement manufacturing companies

Pages: 680-684
Shweta Singh and Balgopal Singh (Faculty of Management Studies, Banasthali Vidyapith, Rajasthan)

Inventory is an imperative expression used in each and every non-financial business corporation. This term is associated with commodities or resources used by a corporation for the intention of manufacturing and retailing. Resources used as a compassionate at the time of production are also considered as inventory. It performs a role of linkage between manufacturing and allocation process. In working capital management the management of inventory plays a vital role because this component is required since initial stage to final stage of operation cycle of an organization. Inventory holds the vital position in estimation as well as maintenance of working capital. The enhancement in the haul in of share holder is the outcome of inventory management. Cement manufacturing companies have in-depth relation with capital due to which it necessitates enormous investment. In the industrial sector, the inventory management is one of the important management issues since inefficiency in inventory management may lead to capital blockage, stock out, shortage of raw materials for production, poor quality of products and loss in the sale proceeds thereby. Return on total assets is used as proxy of profitability and treated as dependent variable during the study. Inventory holding period (IHP) is treated as independent variable. Current Ratio (CR), Financial Debt Ratio (FDR), Size of the firm and sales growth are treated as control variable (Hailu & Venkateswarlu, 2016). Control variables will remain constant during the period of study (Jason Kasozi, 2012). Panel least square method is taking up for the analysis with the postulation of sample companies. The study shows that inventory management trends have insignificant role in improving the liquidity position of the sample companies. Inventory makes the company ore liquid under the current ratio but does not make it more liquid under the acid-test ratio. The current measure depends on how easily you can sell your inventory. If a company can generate cash against the inventory without losing its value, inventory increases the liquidity of the concerned while if it takes a long time to sell the inventory, it does not help in improving the liquidity position of the concerned business.