IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY – A SPECIAL FOCUS ON NIFTY FMCG INDEXED COMPANIES

FMCG sector in India is an exciting and significant contributor to the economy, characterized by intense competition, rapid turnover, and low margins. Working capital management (WCM) is managing liquidity, controlling costs, and improving efficiencies, with direct implications on the profitability of FMCG companies. The rationale of the study is to assess the effects of WCM on profitability within prominent Nifty-indexed FMCG companies, including Hindustan Unilever Ltd. (HUL), Godrej Consumer Products Ltd. (GCPL), Tata Consumer Products Ltd. (TCPL), Britannia Industries Ltd. (BIL), and ITC Ltd. (ITCL). The study seeks to examine the impact of WCM on profitability using Days Inventory Outstanding (DIO), Days Sales Outstanding (DSO), Days Payables Outstanding (DPO), and Operating Cash Flow Margin (OCF) margin, with Net Operating Profit After Tax (NOPAT) as the primary measure of profitability and Earnings Before interest and Tax (EBIT) margin as a control variable to account for operational performance. The application of ANOVA in the study helps to compare the operational efficiency, WCM, and profitability among selected firms, and regression analysis was used to examine the effect of WCM on profitability. The outcomes brought to the light the substantial differences in WCM among companies and had varied implications for profitability. The outcomes point to the critical role of maintaining adequate working capital to optimize financial performance so as to make a vibrant and dynamic FMCG industry. Keywords: Working Capital Management, Profitability, FMCG, Nifty FMCG Index.