WORKING CAPITAL MANAGEMENT (Comparative Analysis between Dabur Nepal Private Limited and Unilever Nepal Limited)

Abstract

This study investigates the relationship between working capital management and profitability in Nepalese manufacturing companies, focusing on Unalive Nepal Limited and Dabur Nepal Limited. Utilizing a descriptive and correlational research design, the study examines financial data spanning five fiscal years from 2018/19 to 2022/23. Convenience sampling was employed based on the availability of annual reports and data. Key working capital proxies analyzed include the Working Capital Ratio, Debtor Turnover Ratio, Debt Equity Ratio, and Assets Turnover Ratio. Profitability was measured using Gross Profit Ratio, Net Profit Margin, Return on Assets (ROA), and Return on Equity (ROE). The findings reveal a positive correlation between short-term liquidity and both ROA and ROE, underscoring the critical role of effective liquidity management. Conversely, a higher Debt Equity Ratio was found to negatively impact ROA and ROE, highlighting the importance of prudent debt management. Additionally, the study identifies a complex relationship between asset turnover and ROA, indicating that while efficient asset utilization is important, other variables also significantly influence profitability. Debt management emerged as a key factor, showing a strong positive correlation with both ROA and ROE. The study concludes that for Nepalese manufacturing firms to enhance their financial performance, they must prioritize liquidity management, maintain a balanced capital structure, and adopt efficient debt management practices. The research emphasizes the interconnected nature of financial ratios and advocates for a holistic approach to financial management to achieve optimal profitability. This nuanced understanding of financial ratios and their collective impact is essential for strategic decision-making in the Nepalese manufacturing sector.