Examining the Impact of Working Capital Management on the Financial Performance of TCS and Infosys Ltd
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Abstract
This study examines the impact of working capital management on the financial performance of Tata Consultancy Services (TCS) and Infosys Ltd., two of India’s leading IT companies. By analyzing key working capital metrics—Inventory Conversion Period (ICP), Accounts Payable Period (APP), Accounts Receivable Days (ARD), and Cash Conversion Cycle (CCC)—this research aims to understand their relationship with performance indicators such as Return on Equity (ROE) and Return on Capital Employed (ROCE). Using multiple regression analysis, the study identifies significant factors influencing the performance of both companies. The results indicate that for TCS, Accounts Receivable Days (ARD) and Cash Conversion Cycle (CCC) have a positive and statistically significant impact on performance. In contrast, for Infosys, factors such as Accounts Payable Period (APP), Accounts Receivable Days (ARD), and Cash Conversion Cycle (CCC) are found to positively influence financial performance. This highlights the importance of optimizing working capital management, particularly in areas such as receivables and cash conversion, to enhance operational efficiency and profitability. The study contributes to the understanding of financial management practices in the Indian IT sector and offers insights for improving corporate performance through effective working capital management.
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