ISSN: (Online) 2321 -4155
ISSN: (Print) 2320 -7000

JOURNAL OF INDIAN RESEARCH
VOLUME : 4, ISSUE : 1, January-December, 2016 (ISSN No. : 2321-4155)
 
Analysis of Short Term Financial Liquidity Position of Public Manufacturing and Trading Enterprises: Empirical Evidence from Nepal
Dr. Bihari Binod Pokharel, Nischal Risal
 
ABSTRACT
The paper aims to provide empirical evidence on the short term financial liquidity position of public manufacturing and trading enterprises in Nepal. The sampling technique is used to select a panel data on 13 public manufacturing and trading enterprises for the period of 2000-2010, which led to total of 138 enterprise-year observations. The result shows that the shorter is the cash conversion cycle, the more profitable the firm is likely to be. The result also shows that the increase in payable deferral period and receivable conversion period lead to the increase in gross profit margin. The gross profit margin increases with decreases in inventory conversion period. Majority of the selected public enterprises are following aggressive working capital policy. In addition to this, Nepali public manufacturing enterprises and trading enterprises are not able to manage liquidity in effective way. The liquidity position of public trading enterprises was found better in comparison with liquidity position of public manufacturing enterprises. The analysis revealed that the net working capital utilization was very poor in public manufacturing enterprises as compared to public trading enterprises. The analysis highlights the importance of managing working capital requirements to ensure an improvement in enterprises profitability.
 
KEYWORD
Liquidity, profitability, public enterprises, working capital
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