Post-GST shifts in working capital metrics of FMCG Companies

Abstract

This study examines the shifts in working capital metrics of India's Fast Moving Consumer Goods sector following the implementation of the Goods and Services Tax. It compares changes in working capital and related metrics for the 5 years of pre-(2012-13 to 2016-17) and post-GST periods (2017-18 to 2021-22) of 10 FMCG companies. The current ratio, net working capital, and working capital to sales ratio have been computed and compared for two designated time frames. The results show a preliminary rise in the current ratio and working capital levels, suggesting the need for improved liquidity to navigate the transition and comply with new regulatory requirements. However, organizations showed enhanced operational efficiencies and financial stability, as evidenced by a decreasing working capital to sales ratio. The study recommends improved inventory management and supply chain optimization.