scholarly journals Management of Receivables, Financial Distress, and Profitability in Bangladesh

2021 ◽  
Vol 11 (9) ◽  
pp. 710-723
Author(s):  
Sharif N Ahkam ◽  
Nazmun Nahar ◽  
Shabnin Rahman Shorna
Keyword(s):  
Financial Distress ◽  
Developed Countries ◽  
Capital Management ◽  
Least Developed Countries ◽  
Working Capital ◽  
Working Capital Management ◽  
Competitive Strength ◽  
New Firm ◽  
Collection Period ◽  
Fine Tune

If a firm's profitability is affected by inefficient working capital practices, it is logical to assume that an adjustment of working capital will improve profitability. In particular, small and medium-sized businesses in the least developed countries (LDCs) and the new economies of Europe suffer from long delays relating to the payment of dues which threaten their survival. When the policies and practices are reasonably efficient, tweaking practices is not expected to be very beneficial. We should observe benefits from adjusting working capital practices for those companies that are clearly outside the norm in the industry. A major part of working capital management is receivables management and collection. In this study, we examine the data on receivables from Bangladesh from 2000 to 2017 to see if companies with inefficient working capital levels benefit from adjusting toward the norm, which is a new way of examining the benefits of adjustment. Specific actions and reactions will depend on the situation. Any adjustments that management make to fine-tune working capital management are unlikely to produce much value unless the underlying circumstances are taken into account. A new firm with a compelling case of quality and competitive strength may be more successful in managing a successful low average collection period (ACP) operating structure, and keeping the ACP low is strongly advised.

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 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.

Determinants of working capital: empirical evidence on manufacturing SMEs

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Filipe Sardo ◽  
Zélia Serrasqueiro
Keyword(s):  
Panel Data ◽  
Financial Distress ◽  
Design Methodology ◽  
Positive Impact ◽  
Panel Data Models ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Content Type ◽  
Probability Of Bankruptcy

PurposeThis study seeks to analyse the determinants of working capital of manufacturing small and medium-sized enterprises (SMEs), particularly the effect of the probability of financial distress on working capital.Design/methodology/approachUsing panel data models, the authors analyse a sample of 3994 manufacturing SMEs for the period 2011–2017.FindingsThe results suggest that SMEs pursue conservative working capital management to avoid the failure to fulfil the commitments with creditors. Also, the positive impact of the probability of financial distress on SME working capital suggests that SMEs exposed to a higher probability of bankruptcy invest more in working capital to avoid the risk of default and financing imbalance.Originality/valueThe novelty of this study is to extend the consequences of aggressive or conservative working capital management by analysing the probability of financial distress on working capital.

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.

scholarly journals Assessing Working Capital Management and Performance of Listed Manufacturing Firms: Nigeria Evidence

2019 ◽  
Vol 11 (2(I)) ◽  
pp. 27-34
Author(s):  
Akinleye G. T. ◽  
ADEBOBOYE Roseline
Keyword(s):  
Manufacturing Firms ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Insignificant Effect ◽  
Earnings Per Share ◽  
Return On Capital ◽  
Negative Effect ◽  
Collection Period ◽  
And Performance

This study assessed working capital management and performance of listed manufacturing firms in Nigeria 20 firms were sampled, over 10 years. The study employed static data analyses and panel Granger causality test. Result showed that average collection period exerts insignificant negative effect on return on capital employed of the sampled firms, while average collection period also exerts insignificant negative effect on earnings per share of the sampled firms. The result further showed that, average payment period exerts insignificant positive effect on return on capital employed of the sampled firms, but average payment period exerts insignificant negative effect on earnings per share of the sampled firms. The study concluded that, average collection period and average payment exert insignificant effect on return on capital employed of listed manufacturing firms in Nigeria, also; average collection period and average payment period exert insignificant effect on earnings per share of listed manufacturing firms in Nigeria. Hence manufacturing firms in Nigeria should objectively manage average collection period and also maintain a consistent improvement in return on capital employed and earnings per share of listed manufacturing firms in Nigeria.

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 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 The effect of working capital management on profitability: a case of listed manufacturing firms in South Africa

2017 ◽  
Vol 14 (2) ◽  
pp. 336-346 ◽  
Author(s):  
Jason Kasozi
Keyword(s):  
Operational Efficiency ◽  
Manufacturing Firms ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Cash Conversion Cycle ◽  
Long Run ◽  
Regression Estimators ◽  
Collection Period ◽  
Better Than

Working capital management plays a pivotal role in enhancing the operational efficiency of firms and their ultimate profitability. Therefore, the purpose of this study was to examine the trends in working capital management and its impact on the financial performance of listed manufacturing firms on the Johannesburg Securities Exchange (JSE). A panel data methodology was used with different regression estimators to analyze this relationship based on an unbalanced panel of 69 manufacturing firms listed during the period 2007–2016. The findings revealed that the average collection period and the average payment period are negative and statistically significant for profitability, implying that firms which efficiently manage their accounts receivable and those that pay their creditors on time perform better than those that do not. Additionally, a positive statistically significant relationship between the number of days in inventory and profitability was supported suggesting that firms which stock-up and maintain their inventory levels suffer less from stock-outs and avoid challenges of securing financing when needed. This increases their operational efficiency and ensures profitability in the long run. It could not be ascertained whether a shorter or longer cash conversion cycle enhances firm profitability, since findings to support this premise were weak. However, it was observed that manufacturing firms are on average, carrying lot of debt in their capital structures. The present study contributes to existing literature by presenting one of the very recent findings on this topic while simultaneously testing the validity of recent local and international methodologies, in order to inform policy change.

scholarly journals Does working capital management impact an enterprise’s profitability? Evidence from selected Nigerian firms

2021 ◽  
Vol 19 (1) ◽  
pp. 477-486
Author(s):  
Adegbola Olubukola Otekunrin ◽  
Tony Ikechukwu Nwanji ◽  
Gabriel Damilola Fagboro ◽  
Johnson Kolawole Olowookere ◽  
Oladipo Adenike
Keyword(s):  
Regression Analysis ◽  
Secondary Data ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Cash Conversion Cycle ◽  
Descriptive Research ◽  
Inventory Turnover ◽  
Collection Period ◽  
The Impact

This study examined the impact of working capital management on the profitability of selected quoted agricultural and agro-allied companies (from 2012 to 2016) in Nigeria. Secondary data were extracted from eighteen quoted agricultural and agro-allied companies in Nigeria, four of which are agricultural companies out of the twenty-three in Nigeria. Descriptive research design and regression analysis were used. Working capital management was measured using the trade receivables collection period, trade payables, payment period, inventory turnover period, and cash conversion cycle, while profit before interest and tax measured profitability. This study found that working capital management and profitability are related to the agriculture and agro-allied sector in Nigeria. The result shows the trade receivables collection period and profitability are negatively related. The result also shows the trade payables payment period and profitability are positively related. The result shows that the inventory turnover period and profitability are related, the cash conversion cycle and profitability are positively related. The conclusion is that working capital management and profitability are related. If the management of firms takes efficient and effective decisions in managing the company’s working capital, all things being equal, the maximization of the firm’s profitability, value, and shareholders’ wealth can be guaranteed. Consequently, agency costs asserted by agency theory would be eliminated automatically. AcknowledgmentAll researchers and non-researchers that contributed to this paper are highly appreciated.

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.

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