IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY IN FMCG COMPANIES: A CASE STUDY OF ITC LTD.

Abstract [English]

Working capital management has very importance for sustaining profit and operating efficiency of industries like fast-moving consumer goods as well as agribusiness. The challenge being faced by the major conglomerate in India, ITC Limited, is actually balancing the liquidity need with growth momentum across its diversified business segments like FMCG, agribusiness, hospitality, and paperboards. It discusses the relationship of ITC WCM practices with profitability and explains how ITC manages crucial working capital items such as inventory, receivables, and payables to give liquidity support and long-term growth.
Using data from various liquidity and efficiency ratios, including Current Ratio, Acid test Ratio, Inventory Turnover Ratio, Receivables Turnover Ratio, Payables Turnover Ratio, Cash Ratio, and Cash Conversion Cycle (CCC), the study looked at the ITC's data. With information on the exact strategies pursued by ITC under WCM through supplementing data from ITC's financial reports with some custom calculations in Excel, the study explains the outcomes of such performance measures.
The results also indicate that WCM practices under ITC are vital to the financial solidity of the firm and contribute significantly to its responsiveness to economic shocks. The Current Ratio and Quick Ratio of ITC are ever depicting a high liquidity of the firm, facilitating the company to service short-term obligations and reduce uncertainty in the marketplace. ITC's Inventory Turnover Ratio seems to portray intelligent management of stock. Digital transformation helps make responsive adjustments in inventory levels based on demand. Better inventory management practices can reduce holding costs, improve cash flow, and streamline supply chain operations for better profitability.
In addition, the Receivables Turnover Ratio of ITC suggests that the company concentrates on faster collection cycles, which supports liquidity and therefore minimizes cash flow constraints. Making use of digital tools and defining credit management policies, ITC has been accelerating the collection cycle process, which enables it to reduce dependence on external funding avenues and provide agility in terms of a cash flow cycle. A Payables Turnover Ratio reflects the company's approach on cash outlays from a strategic and tactical point of view. ITC can manage timely payments to suppliers while looking for opportunities to extend periods of cash retention. The cash balance is hence strengthened without impacting supplier relations.
The Cash Conversion Cycle, another imperative variable of this study, is an expression of the efficiency with which the working capital of ITC can be converted into cash. The CCC captures to what extent ITC's strategy of managing inventory, receivables, and payables is translated in taking cash cycle ahead in accelerated ways that reduce time lapse, thus making cash coming from core operations. Optimized cash flow at ITC then enables it to channel cash returns to profitable activities toward growth and innovation.
In summary, the above research emphasizes how ITC's WCM strategies have constantly been a source of profitability by enhancing cash flows that facilitate healthy financial operations over long-term periods. Digital tool integration and adoption of the sustainable data-driven approach have helped ITC in gaining a competitive edge in its diversified business streams. This research highlights that agile WCM is important for resilience and profitability in the FMCG industry: such research clarifies value maximization through liquidity optimization from companies navigating market dynamics.