A Study on Working Capital Management and Its Effect on Business Performance on Cash cycle, inventory management, receivables management

Working capital management (WCM) is a core operational discipline affecting liquidity, solvency and long-term performance in Fast-Moving Consumer Goods (FMCG) firms. This study examines the relationship between WCM practices — particularly the cash conversion cycle (CCC), inventory management and receivables management — and business performance for Hindustan Unilever Limited (HUL). ITC Limited (ITC) is used as an industry benchmark to highlight contrasting operational strategies. Using secondary data from integrated annual reports for FY2023–24 and FY2024–25 (standalone and consolidated statements), I calculate key WCM indicators, refine measurements using cost-of-goods-sold (COGS) where possible, and link operational policies (digital trading platforms, close-to-demand manufacturing, supplier integration) to balance-sheet outcomes. Findings show that HUL exhibits a compressed CCC — often negative — reflecting rapid inventory turns, disciplined receivables collection, and extended supplier credit; this configuration supports strong operating cash flows and reduces reliance on external short-term financing. By contrast, ITC demonstrates materially higher inventory days, reflecting its upstream agri and manufacturing integration and product mix with perishable/value-added goods; consequently, ITC’s CCC is positive and longer. A COGS-based recalculation of inventory and payables days confirms these contrasts and highlights managerial trade-offs: lean distribution and digital trade lower working capital but require robust forecasting and supplier relationships; upstream integration increases working capital but improves resilience and product quality. Policy recommendations focus on digital payment rails, facilitating trade finance for MSME suppliers, and promoting adoption of AI-driven forecasting at scale. The study contributes to the WCM literature by explicitly linking firm-level operational choices and digital enablers to statutory balance-sheet outcomes in Indian FMCG and providing practical guidance for managers and policymakers. Keywords: working capital management; cash conversion cycle; inventory management; receivables; FMCG; Hindustan Unilever; ITC.