The Trade-Off Between Liquidity and Profitability by analysing the Adequacy of Working Capital in Private Sector Banks
Analyzing the Impact of Working Capital Management on Bank Performance
DOI:
https://doi.org/10.29070/ya9w3j71Keywords:
working capital, liquidity, profitability, debt financing, equity financing, leverage, performance, short-term financing, firm size, asset growthAbstract
The management of working capital is a crucial component of the broader company strategyaimed at optimizing shareholder value. Furthermore, organizations that possess the capability toeffectively handle their working capital are more inclined to promptly adapt to unforeseen shifts in theeconomy. The study's results indicate that both public sector and private sector banks in India exhibit agreater reliance on debt financing as opposed to equity financing. This suggests the existence of anegative trade-off between a firm's leverage and its performance. The effect was not detected in relationto the short-term debt-to-equity ratio, hence suggesting a favorable influence on the performance ofprivate banks in India when using client deposits and other forms of short-term financing. Conversely,there exists a positive correlation between Firm Size and Asset Growth with variables such as Return onAssets (ROA), Earnings per Share (EPS), and Return on Equity (ROE).References
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