Impact of Inventory Management on Operating Profits: Evidence from India

Dr. Khurshid Ali^1, and Numaira Showkat²

¹Business Division, Higher Colleges of Technology, Abu Dhabi, The United Arab Emirates

²Department of Management Studies, University of Kashmir, Srinagar, India

Cite this paper:
Dr. Khurshid Ali and Numaira Showkat. Impact of Inventory Management on Operating Profits: Evidence from India. Journal of Finance and Economics. 2022; 10(2):47-50. doi: 10.12691/jfe-10-2-3

Abstract

The study has been undertaken to ascertain whether Inventory management influences Operating Profits of the sample companies or not. In order to achieve this objective, the researchers have taken under study pharmaceutical industry which is represented by four major companies. A reference period of eight years from 2009-2010 to 2016-2017 has been taken into consideration. The researchers employed Regression Analysis and Analysis of Varience to arrive at some dependable conclusion. The results put forth by the study strongly affirm that independent variable (Inventory Turnover Ratio) does not impact the dependable Variable (Operating Profits) statistically in a significant way, thereby, accepting the null hypothesis that there exists statistically no significant impact of inventory turnover ratio on operating profits. The study corroborates the findings of Roumiantsev and Netessine [1], Suleman Bawa et.al. [2], and Umar [3]. These studies also established that inventory management does not influence the profitability of the firm in any significant way.

Keywords:
inventory management operating profit financial performance

This work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

References:

[1]	Roumianstev S. and Netessine S. (2005), “Should Inventory Policy be Lean or Responsive: An Empirical Analysis” Working Paper, University of Pennsylvania.
[2]	Suleman Bawa, George Effah Asamoah and Ernest Kissi (2018), “Impact of Inventory on Firm Performance: A Study of Listed Manufacturing Firms in Ghana.” International Journal of Finance and Accounting. Vol.7, Issue 4, pp 83-96.
[3]	Umar Farooq (2019), “Impact of Inventory Turnover on the Profitability of Non-Financial Sector Firms in Pakistan.” Journal of Finance and Accounting Research. Vol. 1, No. 1, 2019.
[4]	Numaira Showkat, Dr. Khurshid Ali Ganai and Dr. S.M.Shafi (2020), “A Cross Country Research Review with Special Reference to Management of Inventories in Textile Industry.” International Journal of Scientific Development and Research (IJSDR), Vol.5, Issue 5,
[5]	Onikoyi Idris Adegboyega, Babafemi Emmanuel Akinsanmi, Ojo Solomon and Aje Catherione Oluyemi (2017), “Effects of Inventory Management Practices on financial performance of Larfage Wapco Plc. Nigeria.” European Journal of Business and Management. Vol. 9, No. 8.
[6]	Jean Nepo Mulindabigwi and Patrick Mulyungi (2015), “Effect of Inventory Management on Financial Performance of Manufacturing Firms in Rwanda, A Case Study of Bralirwa.” International Journal of science and Research. Vol. 6, Issue 10, October 2017.
[7]	Vipulesh Shardeo (2015), “Impact of Inventory Management on the Financial Performance of the Firm.” Journal of Business and Management. Vol. 17, Issue 4, April 2015.
[8]	Abdikani Shire Anshur, Mahad Mohamed Ahmed and Mohamed Hassan Dhodi (2018), “The Role of Financial Management on Financial Performance in Some Selected Manufacturing Companies in Mogadishu.” International Journal of Accounting Research. Vol. 6, Issue 2, 2018.
[9]	Adamu Danlami Ahmed, Salihu Aliya Modibbo, Kumshe Hauwa Modu and Bahamman Saleh Muhammad (2015), “Effects of Inventory Management on Financial Performance: Evidence from Nigerian Conglomerate Companies.” Nigerian Journal of Accounting and Finance. Vol. 7, Number 1 &2, 2015.
[10]	Timothy Lwiki, Patrick Boniface Ojera, Nebat Galo Mugenda and Virginia Kirigo Wachira (2013), “The Impact of Inventory Management Practices on Financial Performance of Sugar Manufacturing Firms in Kenya.” International Journal of Business, Humanities and Technology. Vol.3, No.5, 2013.
[11]	Muchaendepi, W. Mbohwa C., Hamandishe T. and Kanyepe J. (2019), “Inventory Management and Performance of SMEs in the Manufacturing Sector of Harare.” 16th Global Conference on Sustainable Manufacturing- Sustainable Manufacturing for Global Circular Economy.
[12]	Daniel Atnafu and Assefa Balda (2018), “The Impact of Inventory Management Practice on Firms’ Competitiveness and Organisational Performance: Empirical Evidence from Micro and Small Enterprises in Ethiopia.” Cognet Business and Management. Vol.5 2018.
[13]	Enock Gideon Musau, Gregory Namusonge, Elizabeth Nambuswa Makokha and John Ngeno (2017), “The Effect of Inventory Management on Organisational Performance among Textile Manufacturing Firms in Kenya.” International Journal of Academic Research in Business and Social Sciences. Vol.7, No.11, 2017.
[14]	Lukumon Akande Salahudeen and Abraham A. (2018), “Effect of Inventory Management System on Operational Performance in Manufacturing Firms: Study of May and Baker Manufacturing Industry Nig Ltd. Lagos.” Iconic Research and Engineering Journals. Vol.2, Issue 5. 2018.
[15]	Syed Jamal Abdul Nasir bin Syed Mohamad, Nurul Nadia Suraidi, Nabihah Amirah Abdul Rahman and Raja Durratun Sakinah Raja Suhaimi, “A Study on Relationship Between Inventory Management and Company Performance: A Case Study of Tetile Chain Store.” Journal of Advanced Management Science, Vol.4, No.4, 2016.
[16]	Yakubu Abubakar, Ese Theresa Esenohor and Gbenga Joseph Olowe (2019), “Inventory Management and Financial Performance of Selected Quoted Firms in Nigeria.” International Journal of Research and Scientific Innovation.” Vol.VI, Issue IV, (2019).
[17]	Elsa George (2019), “A Study on the Impact of Inventory Management on the Profitability of Firms with special reference to Steel Industry.” International Journal of Basic and Applies Research. Vol.9, No. 5, 2019.
[18]	Numaira Showkat and Khurshid Ali (2020), “Conceptual Framework of Invetory Management: A Useful Guide towards the Major Aspects of the Subject” International Journal of Advanced Research, Vol.8, No. 09, 2020, pp-395-411.