scholarly journals Enhancing Operational Efficiency by Optimizing Working Capital Management of Manufacturing Firms

2019 ◽  
Vol 8 (3) ◽  
pp. 2695-2705
Keyword(s):  
Operational Efficiency ◽  
Data Envelopment ◽  
Capital Management ◽  
Working Capital ◽  
Manufacturing Firm ◽  
Working Capital Management ◽  
Target Values ◽  
Dea Analysis ◽  
Input Variables ◽  
Gp Model

In this paper, we present formulations to improve operational efficiency with optimum utilization of working capital management. A case of manufacturing firm is conducted to discuss the stages of analysis. This paper discussing the method to establish the target values for the firms to optimize the working capital and perform as an efficient firm. The concept is explained with the help of Data Envelopment Analysis (DEA) and Goal Programming (GP) techniques. By using the principles of DEA, the firms are able to identify their slacks in inputs and outputs variables to perform as efficient firms. GP model is formulated in which input and output variables are set as goals and then target values are calculated. GP model solution provides the values of each variable with the efficiency in attaining the goals. Here the analysis is explained with the help of a published dataset obtained from the firm Wheel India Limited. The output of the GP model provides the values to be maintained by input variables. These outputs from GP model are validated using output oriented DEA analysis, by replacing the variables value of Wheels India Ltd. by model value.

Benchmarking the efficiency model for working capital management: data envelopment analysis approach

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Himanshu Seth ◽  
Saurabh Chadha ◽  
Satyendra Sharma
Keyword(s):  
Data Envelopment Analysis ◽  
Manufacturing Sector ◽  
Fixed Effect Model ◽  
Manufacturing Industries ◽  
Data Envelopment ◽  
Capital Management ◽  
Working Capital ◽  
Firm Level ◽  
Working Capital Management ◽  
Content Type

PurposeThis paper evaluates the working capital management (WCM) efficiency of the Indian manufacturing industries through data envelopment analysis (DEA) and empirically investigates the influence of several exogenous variables on the WCM efficiency.Design/methodology/approachWCM efficiency was calculated using BCC input-oriented DEA model. Further, the panel data fixed effect model was used on a sample of 1391 Indian manufacturing firms spread across nine industries, covering the period from 2008 to 2019.FindingsFirstly, the WCM efficiency of Indian manufacturing industries has been stable over the analysis period. Secondly, the capacity to generate internal resources, size, age, productivity, gross domestic product and interest rate significantly influence WCM efficiency.Research limitations/implicationsFirst, the selected study period has observed various economic uncertainties including demonetization and recession, so the scenario might differ in normal conditions or country-wise. Second, the findings might not be generalizable to the developed economies, since the current study sample belongs to a developing economy, which further provides scope for comparative study.Practical implicationsAn efficient model for managing the working capital comprising most vital determinants could enhance the firms' valuation and goodwill. Also, this study would be helpful for financial executives, manufacturers, policymakers, investors, researchers and other stakeholders.Originality/valueThis study estimates the industry-wise WCM efficiency of the Indian manufacturing sector and suggests measures to the concerned parties on areas to focus on and provide evidence on the estimated relationships of firm-level and macroeconomic determinants with WCM efficiency.

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 The Interaction of Financial Leverage and Firm's Operational Efficiency

2020 ◽  
Vol 10 (1) ◽  
pp. 235
Author(s):  
Martha Coleman ◽  
Justices Mark Baidoo
Keyword(s):  
Stock Exchange ◽  
Operational Efficiency ◽  
Management Policy ◽  
Cash Holding ◽  
Capital Management ◽  
Working Capital ◽  
Financial Leverage ◽  
Working Capital Management ◽  
S Curve ◽  
The Right

The study examines the effect of financial leverage on operational efficiency. This study used a panel data of 102 non-financial companies listed on Nigeria and Ghana stock exchange for the period 2012 – 2016. It was revealed that there is an S-curve relationship between financial leverage and working capital management and cash holding. Also there is a significant moderating effect on the relationship between internationalization and dividend payout. This implies that firms that are involved in international activities are highly concerned with having borrowing as part of their capital structure than solely operating with owners’ capital which might be the case of most domestic firms. Relationship between financial leverage and working capital management and cash holding is considered to be non-monotonic which gives management insight of choosing the right leverage management policy to achieve desired goal.

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.

Pengaruh Manajemen Modal Kerja Terhadap Profitabilitas Dan Risiko

Liquidity ◽  
2017 ◽  
Vol 6 (2) ◽  
pp. 95-102
Author(s):  
Sri Setia Ningsih
Keyword(s):  
T Test ◽  
Raw Material ◽  
Risk Level ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Trading Company ◽  
Regression Correlation ◽  
Descriptive Method

The purpose of this research is to know about working capital management applied, and its influence on profitability and risk. The research object is trading company moves in import & distribute chemical raw material. The research used analysis descriptive method, and the hypothesis was testing by simple linier regression, correlation, and determination. The result of the research shows that the effect of the implementation of working capital management on the change of the net working capital with tend to rise has a profitability level of 10.4% lower than the net working capital change with tend to go down of 46%, but instead on the risk level, the net working capital change with tend to rise has a risk level of 43.8% higher than the change in net working capital with tend to go down of 0.3%.Based on  t test, the result shows that the net working capital change influence  is not significant  to profitability and risk.

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