AN ANALYTICAL STUDY OF WORKING CAPITAL MANAGEMENT PRACTICES IN FMCG FIRMS.

Abstract

Working capital management (WCM) is a critical financial function that directly influences the operational efficiency, profitability, and liquidity of Fast-Moving Consumer Goods (FMCG) companies. Given the sector’s unique characteristics—high sales volumes, low profit margins, and rapid inventory turnover—FMCG firms must adopt precise and dynamic strategies to manage their short-term assets and liabilities. This research aims to study the working capital management techniques employed by FMCG companies, analyse the effect of these practices on profitability, and evaluate the challenges they face in maintaining liquidity.

The study is based on a comprehensive analysis of financial data from selected Indian FMCG firms over a five-year period (2018–2023), supported by sectoral reports and academic literature. Key WCM techniques such as inventory optimization, receivables control, payables management, and cash flow forecasting are examined in detail. The research employs ratio analysis—including the cash conversion cycle (CCC), current ratio, quick ratio, and inventory turnover ratio—alongside regression models to assess the relationship between WCM efficiency and profitability indicators like return on assets (ROA), return on capital employed (ROCE), and net profit margin (NPM).