Working Capital Management, Profitability and Sustainable Growth: A Structured Review and Future Research Framework for Indian Midcap Firms

Working Capital Management has received considerable attention in corporate finance literature because it affects liquidity, operating efficiency, profitability and firm value. However, the connection between Working Capital Management and Sustainable Growth remains comparatively less explored, particularly in the context of Indian midcap companies. This paper presents a structured review of literature on Working Capital Management, profitability and Sustainable Growth and develops a future research framework for Indian midcap firms. The paper draws upon prior studies that examine the Cash Conversion Cycle, receivables period, inventory period, payables period and their relationship with firm performance. The review shows that the effect of Working Capital Management is not uniform across firms, sectors and economies. While several studies report a negative relationship between Cash Conversion Cycle and profitability, others find positive, mixed or non-linear effects. The non-linear stream of literature is particularly important because it argues that both excessive and inadequate working capital may reduce firm performance. Sustainable Growth further extends this discussion by shifting attention from short-term profitability to a firm’s ability to grow through internal financial capacity. The paper proposes that future studies on Indian midcap firms should examine linear effects, non-linear effects and the mediating role of profitability in the relationship between Working Capital Management and Sustainable Growth. The study contributes by developing a structured conceptual framework for Nifty Midcap 100 firms, a segment that combines growth potential with financial sensitivity.