Estimating the Demand for Working Capital: Evidence from EID Parry (India) Ltd

Abstract

Effective working capital management is essential for maintaining liquidity and ensuring the smooth operation of business activities. This study estimates the demand for working capital in EID Parry (India) Limited by examining the relationship between sales and major working capital components, namely cash, inventory, receivables, gross working capital, and net working capital. The study uses secondary data collected from the company's annual reports and the Capitaline database for the period 2011–12 to 2023–24. A log-linear regression model is employed to analyse the impact of current and previous year's sales on working capital demand. The findings reveal that sales have a positive and significant influence on working capital requirements, indicating that sales-based models are useful for forecasting working capital demand and supporting effective financial planning.

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