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 Working Capital Management (WCM) and Firm Performance in Emerging Markets: A Case of Bangladesh

2021 ◽  
Vol 10 (1) ◽  
pp. 36
Author(s):  
Rafiqul Bhuyan ◽  
Mohammad Sogir Hossain Khandoker ◽  
Noshin Tasneem ◽  
Mahjuja Taznin
Keyword(s):  
Stock Exchange ◽  
Secondary Data ◽  
Total Asset ◽  
Capital Management ◽  
Working Capital ◽  
Return On Assets ◽  
Working Capital Management ◽  
Cash Conversion Cycle ◽  
Current Asset ◽  
The Impact

We examine the impact of efficient working capital management on market value and profitability. Using secondary data on selected firms from Dhaka Stock Exchange we explore the effects of various working capital components (i.e. cash conversion cycle (CCC), current ratio (CR), current asset to total asset ratio (CATAR), current liabilities to total asset ratio (CLTAR), debt to asset ratio (DTAR), siz,e and growth) to the firm’s performance by looking firm’s value i.e. Tobin’s Q (TQ) and profitability i.e. return on asset (ROA) and return on invested capital (ROIC). Our results show that, for both food and overall manufacturing sectors, there is a significant association between working capital variables and firm’s value & return on assets, but an insignificant association with return on invested 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 Working Capital Management and SMEs Profitability in Emerging Economies: The Ghanaian Case

SAGE Open ◽  
2021 ◽  
Vol 11 (1) ◽  
pp. 215824402198931
Author(s):  
Abudu Braimah ◽  
Yinping Mu ◽  
Isaac Quaye ◽  
Alhassan Abubakar Ibrahim
Keyword(s):  
Method Of Moment ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Cash Conversion Cycle ◽  
Efficient Management ◽  
Conversion Period ◽  
Collection Period ◽  
Generalized Method Of Moment ◽  
The Impact

This study empirically examines the impact of working capital management (WCM) on the profitability of Small and Medium Scale Enterprises (SMEs) in the context of a developing economy, Ghana. We analyzed data on 366 SMEs over a 10-year period, spanning 2007 to 2016. Generalized method of moment (GMM) estimation was employed. The results reveal a positive relationship between trade payable period and profitability. The inventory conversion period and cash conversion cycle show a negative association with profitability. The results show an inverted U-shaped relationship between trade receivables collection period and corporate profitability, an indication of an optimal trade receivables collection period that maximizes profitability. Further check suggests a deviation from the optimal trade receivables collection period significantly and negatively affects corporate profitability. The study reveals the need for firms to ensure efficient management of working capital to maximize profitability.

scholarly journals The Impact of Working Capital Management on Profitability: The Case of Small and Medium-Sized Export Companies in Tunisia

2011 ◽  
Vol 15 (3) ◽  
pp. 71-88 ◽  
Author(s):  
Meryem Bellouma
Keyword(s):  
Negative Relationship ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Random Effects Models ◽  
Accounts Receivable ◽  
Cash Conversion Cycle ◽  
Fixed And Random Effects ◽  
Financial Decision ◽  
The Impact

Working capital is an important component in the financial decision of the company. An optimal working capital management is reached through a trade off between profitability and liquidity. This study aims to provide empirical evidence about the effects of working capital management on the profitability of 386 Tunisian export SMEs observed from 2001 to 2008. The results of fixed and random effects models show a negative relationship between corporate profitability and the different working capital components. This reveals that Tunisian export SMEs should shorten their cash conversion cycle by reducing the number of days of accounts receivable and inventories to increase their profitability.

scholarly journals Impact of Working Capital Management on Corporate Profitability- Empirical Evidence from Pharmaceutical Industry of Bangladesh

2018 ◽  
Vol 10 (9) ◽  
pp. 136
Author(s):  
Rakibul Islam ◽  
Mohammad Emdad Hossain ◽  
Mohammad Nazmul Hoq ◽  
Md. Morshedul Alam
Keyword(s):  
Regression Analysis ◽  
Correlation Matrix ◽  
Negative Impact ◽  
Pearson Correlation ◽  
Capital Management ◽  
Working Capital ◽  
Data Set ◽  
Working Capital Management ◽  
Pharmaceutical Firms ◽  
The Impact

Working capital management plays centric role in enhancing operational efficiency and their ultimate profitability. Globally financial managers have been searching the proper way on how to utilize working capital components which prolong profitability. The purpose of this study is to assess the impact of working capital components on profitability indicators of selected pharmaceutical firms in Bangladesh. The paper used financial data of 9 pharmaceutical firms listed in Dhaka stock exchange (DSE) covered 2011-2015. Two methods were used in this study for analysis data set. Firstly, to measure the relationship between selected variables Pearson Correlation matrix was used. Secondly, multiple regression analysis was used to investigate the impact working capital components on profitability of selected pharmaceutical firms. The study also conducted Durbin Watson test to assess autocorrelation of selected variables. In this study the correlation matrix identified a negative correlation between working capital components and profitability, whereas regression analysis found number of days account receivable (AR) had significant positive and current ratio (CR) and debt ratio (DR) had appeared a significant negative impact on profitability.

scholarly journals Working Capital Management and Its Impact on Profitability in Tyre Industry: A Study of Selected Companies

2021 ◽  
Vol 2 (1) ◽  
pp. 40-46
Author(s):  
Tushar Rameshbhai Ajmera
Keyword(s):  
Regression Analysis ◽  
Financial Management ◽  
Stock Exchange ◽  
Practical Implication ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Turnover Ratio ◽  
The Impact ◽  
Tyre Industry

Purpose: The main aim of this article is to find out the working capital management and its impact on profitability in Tyre Industry of selected companies which are listed on stock exchange in India. Approach/ Methodology/ Design: For the study, a time span of 8 years from 2011-12 to 2018-19 is considered, and based on it, any relation of net profit margin ratio and working capital components like current ratio, quick ratio, inventory turnover ratio, working capital turnover ratio is considered. The sample is selected based on higher market capitalisation during the study period. Regression analysis is also employed to investigate the impact of WCM on corporate profitability. Findings: The major findings of this study indicate that the profitability of Balkrishana was good   compared to the other companies. The working capital of Ceat shows highly positive working capital management, whereas Apollo shows negative working capital management. These results were identified with the help of accounting tool as Ratio analysis and statistical tools as Regression analysis and ANOVA test for selected data. Practical Implication: The study examines the scenario of tyre industry with the help of working capital management in selected companies. The results of the study could be an indicator of the performance of the selected companies.   Originality/Value:  This paper provides some key insights to health and efficiency of the selected companies. The working capital ratios are indicative of good working capital management, leading to identifying issue in financial management and eventually improving the performance of the tyre industry.

scholarly journals Cash Conversion Cycle and Profitability, Evidence from Jordan

2019 ◽  
Vol 11 (2) ◽  
pp. 81
Author(s):  
Manar Moffadi Al-Mohareb
Keyword(s):  
Stock Exchange ◽  
Theoretical Aspect ◽  
Practical Aspect ◽  
Manufacturing Firms ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Cash Conversion Cycle ◽  
Amman Stock Exchange ◽  
The Impact

This study investigates the impact of working capital management and its components on profitability as a practical aspect, and how is compatible with the theoretical aspect. Besides, it examines other financial factors that may affect profitability by using a sample of Jordanian manufacturing firms listed in the Amman Stock Exchange for the period (2016-2018). Theoretically, manufacturing firms that have been studied have current assets over half of their total assets. Therefore, the working capital management role will be clearer on firm profitability.Practically, the results indicate that there is a significant relationship between the cash conversion cycle, which is considered as a proxy of working capital management, and profitability of the manufacturing firms. This provides an opportunity to create value for shareholders by decreasing receivable accounts and inventory, enhancing the profitability of the firms and reducing the collection period and by adopting effective credit policy.

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 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.

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