An Analysis of Working Capital Trend in Public Sector Telecom Companies in India (Bsnl & Mtnl)

Working capital plays a significant role in improved profitability of firms. Firms can achieve optimal management of working capital by making the trade-off between profitability and liquidity. This paper analyzes trend of working capital over past 09 year of public sector telecom companies in India i.e. BSNL and MTNL. Working capital plays a very significant and vital role in the performance of a firm as it is required for day to day routine transaction. Every company should maintain sufficient level of work - ing capital to avoid the problems such as illiquidity, bankruptcy etc. Therefore, the level of Working Capital must be properly determined and allocated to various segments, effectively controlled and regularly reviewed in order to have adequate and efficient flow of working capital. In this perspective, this paper analyzes working capital trend of public sector telecom companies. In this paper working capital trend analysis represents a picture of variations in current assets, current liabilities and working capital of Public Sector Telecom companies of India over a period of time. Trend Analysis is a tool of financial analysis where changes are compared to the base year, keeping the base year as 100. Such an analysis helps us to study upward / downward trends in current assets and current liabilities and its effect on working capital. This study will be helpful to the investors, government, financial analyst, various stake holder of the company and many other users of the financial information. Introduction: Working capital is meant to support the day to day normal op- erations of an enterprise. The working capital has become a very important part of a firm's financial management because its functioning not only affects the survival of firm but the perfor - mance of firm is also dependant on how effectively and efficient - ly working capital is utilized in the firm's operations. Therefore, it is very important to see that how working capital manage- ment policies affect the firms performance. Traditionally, the primary objective of Working Capital policies was considered to maintain sufficient cash to meet the claims of creditors. How - ever, the concept of working capital management has changed and now a days it also includes management of all current as- sets including cash, inventory, marketable securities, accounts receivable, as well as the current liabilities. Therefore, the level of Working Capital must be properly determined and allocated to various segments, effectively controlled and regularly reviewed in order to have adequate and efficient flow of working capital. Maintaining liquidity was one of the prime goals of the firms for number of years and they strive to maintain higher liquidity to safeguard against risk of default. This focus was mainly due to the reason that, at that time the financial viability of firms was associated with their liquidity. The working capital trend analysis represents a picture of varia- tions in current assets, current liabilities and working capital of Public Sector Telecom companies of India over a period of time. Such an analysis helps us to study upward / downward trends in current assets and current liabilities and its effect on working capital. Literature Review: Dr. Muhammad Azam (2011) has done the study to investigate the impact of working Capital Management on firms' perfor - mance. The results are obtained by using Canonical Correlation Analysis for identifying the relationship between working capital management and firms' performance. The findings of his study shows that working capital management has significant impact on firms' performance and it is concluded that managers can increase value of share holder and return on asset by reducing their inventory size, cash conversion cycle and net trading cycle. Chowdhury and Amin (2007) has done the study to measure the impact of overall working capital policies on the profitability firms. The primary and secondary data was used for the purpose of study. The results of their study indicated that for the over - all performance of the industry, working capital management played a vital role and there existed a positive relationship be- tween current assets management and performance of firms. Sumaira Tufail (2012) has mentioned in her study that Working capital can be considered as source of existence for a financial body and management of working capital is regarded as one of the most essential part of business management. Results of her study shows that aggressiveness of working capital management policies is negatively associated with profitability. Moreover li- quidity and size of the firm have positive relation profitability whereas debt to equity ratio is negatively correlated with profit - ability. Mohammad Morshedur Rahman (2011) has mentioned in his study that profitability and Working Capital Management posi - tion of the Textiles Industry in bangladesh are not satisfactory. The study reveals that correlation exists between Working Capi- tal Management and Profitability. The study also brings to fore that Working Capital Management has a positive impact on