Strategic Evaluation of Working Capital Policies: A Quantitative Study of Indian Capital Goods Manufacturers

Abstract

Working capital management is a cornerstone of corporate financial strategy, especially within capital-intensive industries such as the capital goods manufacturing sector. In the Indian context, where economic volatility, credit cycles, and operational constraints persist, the strategic formulation and execution of working capital policies are essential for ensuring liquidity, sustaining profitability, and enhancing financial stability. This study undertakes a quantitative and industry-specific investigation into the working capital policies adopted by Indian capital goods manufacturing companies, focusing on both investment and financing dimensions.

The research is grounded in a rigorous quantitative methodology, using secondary financial data sourced from Moneycontrol as of January 15, 2025. The initial sample of 259 companies was filtered through a systematic screening resulting in a final sample of 157 companies. The study employs descriptive statistics, ratio analysis, correlation, and regression techniques to evaluate the structure, effectiveness, and strategic alignment of working capital investment policies (WCIP) and working capital financing policies (WCFP).

The core objectives of the study are twofold: (1) to identify and analyze the specific working capital policies adopted by these firms, and (2) to explore the relationship between these policies and the fundamental financial characteristics of the companies. By investigating both WCIP and WCFP in relation to indicators such as profitability, leverage, asset structure, and liquidity, the research offers a comprehensive understanding of the financial behavior within this sector.

This study’s originality lies in its focused examination of working capital practices within the Indian capital goods manufacturing industry—an area that has received limited empirical attention. Moreover, by integrating strategic considerations into the analysis of financial policies, this research bridges a critical gap between operational finance and long-term corporate strategy. The findings are expected to offer actionable insights for finance managers, policy advisors, and academic researchers, enabling improved financial decision-making and contributing to the broader discourse on sustainable industrial growth. Transparency, ethical data handling, and a structured methodological framework ensure the robustness and reliability of the study’s outcomes.