A Study on Working Capital Management in the Indian Hotel Industry

Working capital essentially refers to the capital required for running day to day business and thus is very significant aspect for any business entity as it facilitates smooth functioning and efficient asset utilization. In this backdrop, the current study examined the working capital management (WCM) as represented by working capital ratios of the Indian Hotel Industry for a period of fifteen years from 1996 to 2010. The analysis revealed that asset structure of hotel industry is capital intensive with lower proportion of current assets. Also, dominance of receivables was observed in the current asset structure with ample scope of improvement in receivables management. The results of regression analysis revealed significant upward trend for CATAR indicating increase in proportion of current assets to total assets over the study period and similar results were obtained for CBBTCAR, PETCAR, MSTCAR indicating that increase in current assets was mainly caused due to increase in cash and bank balance, prepaid expenses and marketable securities. A significant upward trend was also observed for TATR, CATR, ITR and RTR, whereas significant downward trend was observed for RTCAR, LATCAR, IHP, ACP and OC; both of them indicating efficient WCM. Effective utilization of total assets and current assets is suggested by scaling the operations and thereby sales