Analyzing Working Capital Efficiency, Including Accounts Receivable ( Customer Payments) and account s payable

Abstract

Working capital management is an essential part of financial management because it helps companies maintain smooth business operations, improve liquidity, and ensure profitability. Proper management of accounts receivable and accounts payable plays a major role in maintaining stable cash flow and uninterrupted production activities. This study examines the working capital efficiency of PMI Engineering Exports Pvt. Ltd., Chennai, with special reference to accounts receivable and accounts payable during the period from 2020–21 to 2024–25.

The study mainly uses secondary financial data collected from annual reports, financial statements, company records, and internal reports. Various financial tools such as Debtors Turnover Ratio, Average Collection Period, Payables Turnover Ratio, Average Payment Period, Working Capital Turnover Ratio, Cash Conversion Cycle, Comparative Statement Analysis, and Trend Analysis were used to evaluate the company’s working capital performance.

The findings indicate that the company maintained efficient receivables and payables management practices throughout the study period. The Debtors Turnover Ratio improved from 4.6 times to 4.9 times, while the Average Collection Period reduced from 79 days to 74 days, showing better receivables collection efficiency. Similarly, the Payables Turnover Ratio increased from 6.1 times to 6.5 times, reflecting effective supplier payment management. The Cash Conversion Cycle also improved from 98 days to 96 days, indicating efficient operational cash flow management.

The study concludes that PMI Engineering Exports Pvt. Ltd. maintained sound working capital management practices that contributed to improved liquidity position, operational efficiency, and business growth. The study also suggests strengthening receivables management, inventory control, and cash flow planning for long-term financial sustainability.