Abstract:
Working capital is required to manage day to day operation of a business. Management of adequate working capital is essential as it has direct impact on profitability and liquidity. An attempt has been made in this paper to study the size and its components and liquidity management in factoring companies. The paper also makes an attempt to study the correlation between liquidity and profitability of factoring companies. SBI factors and CanBankFactors Ltd. were selected for the purpose of study. The study is based on secondary data collected from annual reports of SBI factors and Commercial Services Ltd., and CanBank Factors Ltd. Ratio analysis and percentage method and spearmans rank correlation have been used to analyse the data. T-test was used to check the significance of correlations. It was observed from the study that the sundry debtors and amount due to creditors are the major components of current assets and current liabilities in determining the size of working capital. Liquidity and profitability are inversely related to each other in both factoring companies. The liquidity of Canbank factors is strongly related to profitability than SBI factors.
