Impact of Financial Management on Profitability: Evidences from Indian Petrochemical Sector

Financial Management has the potential to influence profitability in the short run as well as in the long run both through incurrence of costs and through facilitating generation of revenue. This research paper aims to investigate the relationship between financial management and profitability of the domestically-listed large petrochemical companies. The variables considered are Long Term Debt to Equity Ratio, Current Ratio, Inventory Ratio, Debtors Ratio and Profit After Tax to Sales Ratio. The data was analyzed using multiple regression technique. The results obtained suggest that Long Term Debt to Equity Ratio appears to have significant but negative relationship with profitability. This leads us to believe that the enterprises having lower debt component tend to be more profitable. It further points out that Inventory and Debtors do not have significant influence on the profitability. This research may help the corporate managers and academicians to develop better insight for financial management in their attempt to optimize the profitability