Profitability study automobile industry - Jafari Fatemeh - Bog

The working capital has an effect on the liquidity as well on the profitability of the firm. So, it is important to study the role of working capital in the profit generating process. If the firm desire to improve liquidity, increases the size of working capital of the firm. On the other hand, if a company is interested to obtain a greater risk for greater profits, it decreases the size of working capital in relation to its sales. The firm should trade off between its profitability and liquidity and decide the size of its working capital requirement. The objective of any firm is to maximize the profit. But, maintaining liquidity of the firm is an important objective also.