Exploring the relationship of discrete components of inventory with financial performance in Indian automotive industry
by Tanuj Nandan; Vikas Kumar Choubey
International Journal of Industrial and Systems Engineering (IJISE), Vol. 31, No. 1, 2019

Abstract: Inventory holdings and its discrete components [i.e., raw material inventory (RMI), work in process inventory (WIPI) and finished goods inventory (FGI)] are very important factors influencing the firm performance. The objective of this paper is to study the relationship between discrete components of inventory [raw material (RM), work-in-process (WIP), and finished goods (FG)], and financial performance in manufacturing companies. Statistical analysis has been applied to the financial information of 522 Indian automotive manufacturing firms over the ten-year period from 2002-2003 to 2011-2012. Through the analysis, this paper finds statistically significant relationships between the discrete components of inventory and measures of financial performance (at both the gross and operating levels) for firms in automotive manufacturing industries. This paper adds to previous literature by discussing and testing the relationship between the discrete types of inventory (RMI, WIP, and FGI) and firm's profitability of operations, both at the gross and at the operating profit levels.

Online publication date: Thu, 13-Dec-2018

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