scholarly journals The Relationship between Working Capital Management and Profitability: Evidence from Pakistan

2014 ◽  
Vol 20 ◽  
pp. 14-25 ◽  
Author(s):  
Nadeem Iqbal ◽  
Naveed Ahmad ◽  
Zeeshan Riaz
Keyword(s):  
Positive Relationship ◽  
Stock Exchange ◽  
Negative Relationship ◽  
Theoretical Research ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Cash Conversion Cycle ◽  
Collection Period ◽  
The Relationship

In this paper secondary data is used for analysis of working capital on profitability. In this research paper we take working capital as independent variable and net operating profit as dependent variable. We have found a significant negative relationship between net operating profitability and the average collection period, inventory turnover in days, average payment period and cash conversion cycle for a sample of Pakistani firms listed on Karachi stock exchange. Previous theoretical research predicts negative relationship between cash conversion cycle and corporate profitability. The results of regression indicate that the coefficient of account receivable is negative; that is, the increase or decrease in average collection period wills significantly affect the profitability of the firm. According to inter-item correlation matrix the relationship of account receivables, account payables and inventory with profit shows positive relationship but cash conversion cycle, financial debt and financial assets shows negative relationship with profitability. Inventory shows the positive relationship with dependent variable which proves that working capital management has a positive effect on firm’s probability.

scholarly journals Working Capital Management and the Profitability of Non- Financial Firms Listed on the Zimbabwe Stock Exchange (ZSE)

2014 ◽  
Vol 9 (1) ◽  
Author(s):  
Walter Gachira ◽  
Washington Chiwanzwa ◽  
Dingilizwe Jacob Nkomo ◽  
Runesu Chikore
Keyword(s):  
Firm Value ◽  
Positive Relationship ◽  
Stock Exchange ◽  
Negative Relationship ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Financial Firms ◽  
Cash Conversion Cycle ◽  
The Impact

Working capital is essential for the day-to-day operations of a firm. The study examines the impact of working capital management on the profitability of non-financial firms listed on the Zimbabwe Stock Exchange (ZSE). Using panel data methodology, the direction and extent of the impact of working capital management on profitability is scrutinised. The regression analysis is based on a panel sample of 39 non-financial firms listed on the ZSE from 2009 to 2013, the period under which the Zimbabwean economy has been operating under the multicurrency system. It was found that there is a positive relationship between debtors’ days and firm’s profitability, a negative relationship between creditors’ days and profitability and a positive relationship between firm’s cash conversion cycle and its profitability. There is some negative relationship between current ratio and profitability, while inventory turnover days and profitability are positively related. Debt to asset ratio as a control variable has a significant negative relationship with firm value and profitability. The results of the study show that for the companies included in the sample, there are mixed effects of the components of working capital on firm performance. Managers can thus create value for shareholders by taking note of the existence of such relationships and take measures that enhance firm profitability.

scholarly journals Working capital management and profitability: evidence from Indonesian manufacturing companies

2020 ◽  
Vol 3 (1) ◽  
pp. 36-46
Author(s):  
Irfan Aryawan ◽  
Astiwi Indriani
Keyword(s):  
Stock Exchange ◽  
Manufacturing Companies ◽  
Capital Management ◽  
Working Capital ◽  
Return On Assets ◽  
Working Capital Management ◽  
Cash Conversion Cycle ◽  
Conversion Period ◽  
Collection Period ◽  
The Relationship

The aims of this study is to analyze the relationship between working capital management and profitability (return on assets) as a dependent variable and cash conversion cycle (CCC), inventory conversion period (ICP), average collection period (ACP) and average payment period (APP) as independent variables with leverage, liquidity, and size as the controlling variables. The sample of this study are manufacturing companies in the Indonesian Stock Exchange 2013-2017. The analysis using OLS showed that the ACP has a negative and significant effect on ROA and the APP has a positive and significant effect on ROA, meanwhile CCC and ICP has a negative and insignificant effect on ROA.

scholarly journals Investigating the Relationship between Working Capital Management and Stock Price Crash Risk

2019 ◽  
Vol 3 (1) ◽  
pp. 28-35
Author(s):  
Ebrahim Mansoori ◽  
Masood Elyasi ◽  
Rahim Mohammadi
Keyword(s):  
Stock Price ◽  
Stock Exchange ◽  
Panel Data Analysis ◽  
Negative Relationship ◽  
Crash Risk ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Cash Conversion Cycle ◽  
The Relationship

The main purpose of this study is to investigate the effect of working capital management on stock price crash risk. The sample includes 103 Iranian firms listed on the Tehran Stock Exchange from 2013 to 2017. Panel data analysis with fixed effect estimation has been used to analyze the relationship between working capital management and stock price crash risk. Cash conversion cycle, working capital requirement, current, and quick ratios were applied as comprehensive measures for working capital management, and Hutton’s model was applied as a measure for stock price crash risk. The results indicate that there is a negative relationship between working capital indicators and stock price crash risk. Therefore, managers can use working capital strategies to decrease the risk of the stock price crash. Furthermore, asymmetry information may, in fact, increase a manager’s incentive to use working capital strategies to reduce the stock price crash risk.

scholarly journals Manajemen Modal Kerja Dan Dampaknya Terhadap Nilai Perusahaan Dengan Corporate Governance Sebagai Variabel Pemoderasi

2014 ◽  
Vol 6 (1) ◽  
pp. 68
Author(s):  
Adrianus Dhimas Setyanto ◽  
Ika Permatasari
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Stock Exchange ◽  
Capital Management ◽  
Working Capital ◽  
Corporate Values ◽  
Working Capital Management ◽  
Enterprise Value ◽  
Cash Conversion Cycle ◽  
The Relationship

AbstractThis study aims to determine the effect of working capital management on firm value. Corporate governance is used as a moderating variable in this study to explore the role of corporate governance in the relationship between working capital management with corporate values. Program participants of Corporate Governance Perception Index (CGPI) are used as a sample during the period from 2003 to 2011 and listed on the Indonesian Stock Exchange (IDX). We were using simple linear regression and the testing of moderating effects were calculated by Moderated Regression Analysis (MRA). The results showed that the working capital management has an influence on the value of the firm. However, corporate governance variables failed to moderate the relationship between working capital management and enterprise value. It shows that companies and investors in the market still lack concern for the program response and Corporate Governance Perception Index (CGPI) as an assessment of the application of the principles of corporate governance that has been done by the company .Keywords: Working Capital Management, Cash Conversion Cycle, Corporate Governance, Firm Values

scholarly journals The Relationship between Working Capital Management and Profitability of Bumiputera-Controlled Companies in Malaysia

2018 ◽  
Vol 2 (3) ◽  
pp. 24-34
Author(s):  
Fairuz Sofia Kaharuddin ◽  
Ahmad Rizal Mazlan
Keyword(s):  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Trade Off ◽  
Cash Conversion Cycle ◽  
Conversion Period ◽  
Panel Data Regression ◽  
Data Regression ◽  
Collection Period ◽  
The Relationship

This study investigated the relationship between working capital management and profitability of 94 listed Bumiputera-controlled companies in Malaysia for 2006 until 2012. The underlying theory is the trade-off theory of working capital and cash conversion cycle, and its components are used as measures for working capital management. Findings of the panel data regression reveal that inventory conversion period and receivable collection period are significantly negatively correlated to profitability. This suggests that the shorter the period, the higher the profitability of Bumiputera-controlled companies tends to be. However, the cash conversion cycle is significantly and positively correlated to profitability, suggesting that the longer the cash conversion period, the higher the profitability. The payable collection period is not significantly correlated to profitability. The findings of this study assert that in general, Bumiputera-controlled companies are relatively less efficient in its working capital management, as far as the comparison to previous related studies is concerned.

scholarly journals The effect of working capital management on profitability

2020 ◽  
Vol 9 (6) ◽  
pp. 114-122
Author(s):  
Tarik Hossain
Keyword(s):  
Negative Relationship ◽  
Ordinary Least Squares ◽  
Manufacturing Companies ◽  
Capital Management ◽  
Working Capital ◽  
Manufacturing Firm ◽  
Working Capital Management ◽  
Cash Conversion Cycle ◽  
Collection Period ◽  
The Impact

This research aims to analyze the impact of efficient working capital management on the profitability of the manufacturing firm in Bangladesh. Fifty-two manufacturing companies listed with Dhaka Stock Exchange (DSE) have been selected randomly from 2012 to 2017. Return on Assets (ROA) and Return on Equity (ROE) are used as indicators of profitability, while the inventory conversion period (ICP), the average collection period (ACP), the average payment period (APP), and the Cash Conversion Cycle (CCC) are used as the independent variables which are used as a measurement of working capital management of the firm. Ordinary Least Squares regression models and Pearson's Correlation are used to establish the relationship between working capital management and profitability. The results revealed a significant negative relation between ROA and CCC, ACP; a significant negative relationship exists between ROE and CCC, APP. Manufacturing companies can increase profitability by decreasing the cash conversion cycle, average payment period, and average collection period. It also revealed that ICP is also positively related to ROA and ROE. Therefore, this research concludes that efficiently and effectively managing working capital is very important for increasing manufacturing companies' profitability.

Working Capital Management and Firms' Profitability in the Midst of an Economic Crisis

2018 ◽  
Vol 5 (2) ◽  
pp. 66-80
Author(s):  
Dimitris Axiotis ◽  
Alina Hyz ◽  
Petros Kalantonis
Keyword(s):  
Economic Crisis ◽  
Financial Constraints ◽  
Negative Relationship ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Cash Conversion Cycle ◽  
Size Growth ◽  
The Impact ◽  
The Relationship

The purpose of this article is to identify the relationship between working capital management and corporate performance in adverse economic circumstances. The results show positive relationship between profitability and cash conversion cycle, firm's size, growth and leverage and negative relationship between profitability and components of cash conversion cycle. Analysing the impact of the crisis it can observe that the companies can increase their profitability by reducing the period of credit granted to customers. The significance of this study stems from the fact that it sheds light for the desirable firms' policy during the period of financial constraints. Prior research on this subject has looked into various issues related to the linkage between working capital management and profitability, however, none has examined what this relationship looks like following a prolonged economic crisis.

scholarly journals Working Capital Management and Its Impact on the Profitability of Pukar International Co.Ltd.

NCC Journal ◽  
2019 ◽  
Vol 4 (1) ◽  
pp. 141-147
Author(s):  
Puspa Raj Ojha
Keyword(s):  
Descriptive Analysis ◽  
Negative Relationship ◽  
Capital Management ◽  
Working Capital ◽  
Return On Assets ◽  
Current Ratio ◽  
Working Capital Management ◽  
International Trading ◽  
Collection Period ◽  
The Relationship

This paper aims to report the results of an investigation of the relative importance of working capital management, measured by the Return on Assets (ROA), and its components (Current ratio, average collection period and average payment period) to the profitability of Pukar International Trading. This paper analyzes the effect of working capital Management on firm’s profitability in Nepal for the period 2071 to 2072. For this Purpose, financial data of four year is used. Pearson’s correlation and Descriptive analysis were used to establish the relationship between working capital management and firm’s profitability and components of working capital like Average collection period, Average payment period and Current ratio. The study finds a negative relationship between profitability and average collection period and average payment period, but appositive relationship between profitability and current ratio. Moreover, current ratio and firm size also have significant effects on the firm’s profitability. Based on the key findings from this study it had been concluded that the management of a firm could create value for their shareholders by reducing the number of day’s accounts collection. Firms could also take long to pay their creditors in as far as they did not worry their relationships with these creditors.

scholarly journals Analysis of Working Capital Management in Automotive Industry Sector Listed in Indonesia Stock Exchange

2021 ◽  
Vol 5 (1) ◽  
pp. 67-78
Author(s):  
Satriya Candra Bondan Prabowo ◽  
Rini Safitri
Keyword(s):  
Automotive Industry ◽  
Raw Materials ◽  
Stock Exchange ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Cash Conversion Cycle ◽  
Industry Sector ◽  
Collection Period ◽  
A Company

This study aims to determine the analysis of working capital management in automotive industry sector listed on the Indonesia Stock Exchange. The object of the study consisted of 12 companies included in the automotive industry sector which were listed on the Indonesia Stock Exchange from 2014 to 2018. The results showed that the average collection period, inventory collection period, average payment period, and cash conversion cycle showed fluctuating results during the study period . The less time it takes for a company to collect receivables, the more liquid a company is. While the less time needed to convert raw materials into finished goods shows good results because the inventory will not be too long in the warehouse so that it will reduce costs. The average payment period is relative for each company. That's because every company has a debt agreement with a certain period. The less time needed by the company since the raw materials purchased are paid until the trade receivables from the sale are billed, the better for the company because the faster the time needed to turn money into goods and into cash back which will increase company profits.

scholarly journals The Relationship between Working Capital Management and Profitability: Evidence in Viet Nam

2017 ◽  
Vol 12 (8) ◽  
pp. 175
Author(s):  
Le Duc Toan ◽  
Ho Van Nhan ◽  
Le Nguyen Ngoc Anh ◽  
Le Quang Man
Keyword(s):  
Stock Exchange ◽  
Negative Relationship ◽  
Financial Assets ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Construction Companies ◽  
Cash Conversion Cycle ◽  
Doing Business ◽  
Significant Negative Relationship

This study is aimed at explaining relationship between working capital management and profitability with Vietnam empirical evidence. We selected a sample of 34 construction companies listed in the Vietnam stock exchange for the period of 2007 -2015. We found statistically significant negative relationship between the cash conversion cycle with profitability and also found statistically significant positive relationship between the debt ratio and the fixed financial assets ratio with construction companies’ profitability. The results have the special meaning to construction companies in which Vietnamese construction companies doing business in the Vietnamese economy have their own characteristics.

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