Providing a New Model for Assessment of Working Capital Management:Evidence from Tehran Stock Exchange

2015 ◽  
Vol 1 (1) ◽  
pp. 108
Author(s):  
Seyed Reza Seyednezhad Fahim ◽  
Meysam Kaviani ◽  
Mohamad Pashaei Fashtali
Keyword(s):  
Financial Management ◽  
Stock Exchange ◽  
Capital Management ◽  
Working Capital ◽  
Return On Assets ◽  
Working Capital Management ◽  
Organization Management ◽  
New Model ◽  
Cash Conversion Cycle ◽  
Relationship Of

Working Capital Management (WCM) is one of the key facets of financial management and organization management, for the direct effect it has on company liquidity and profitability. There is a probability of bankruptcy for companies with poor working capital management despite generation of positive return. Current paper explains the relationship of WCM with profitability-based indicators at the hand of a new model. For this purpose, 90 listed companies on Tehran Stock Exchange whose financial data for the period 2008 through to 2012 was available were selected. The results do not confirm significant inverse U-shape relationship of Cash Conversion Cycle (CCC) and Net Working Capital to Total Assets (NWC/TA) as indicators (predictors) of working capital with Return on Assets (ROA), but do indicate a significant inverse U-shape relationship of current ratio and quick ratio with ROA. From the findings, one might infer that each industry has its own optimum current and quick ratios maximizing its return.

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 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 Apakah Profitabilitas Memediasi Pengaruh Manajemen Modal Kerja terhadap Nilai Perusahaan?

2021 ◽  
Vol 3 (2) ◽  
pp. 103-114
Author(s):  
Evan Yulandreano ◽  
Apriani Dorkas Rambu Atahau ◽  
Imanuel Madea Sakti
Keyword(s):  
Firm Value ◽  
Positive Impact ◽  
Stock Exchange ◽  
Capital Management ◽  
Working Capital ◽  
Return On Assets ◽  
Working Capital Management ◽  
Cash Conversion Cycle ◽  
Company Value ◽  
Panel Data Regression

This study aims to examine the effect of working capital management on firm value with profitability as a mediating variable. This study uses a sample of 18 retail companies listed on the Indonesia Stock Exchange from 2014 to 2018. Working capital management is measured by Cash Conversion Cycle (CCC), profitability is measured by Return on Assets (ROA), and company value is measured by Tobins Q. Panel data regression is conducted to test the direct effect, followed by the Sobel test to test for the indirect effect. The results showed that working capital management increased firm value directly and indirectly through profitability. Working capital management with a shorter cycle results in greater profitability, thus driving firm value. The implication of this research is that retail companies are expected to shorten the company's cash cycle so that it has a positive impact on the company's profitability and value. DOI: https://doi.org/10.26905/afr.v3i2.5452

scholarly journals THE EFFECTS OF WORKING CAPITAL MANAGEMENT ON THE PROFITABILITY OF NIGERIAN MANUFACTURING FIRMS

2013 ◽  
Vol 14 (3) ◽  
pp. 520-534 ◽  
Author(s):  
Omo Aregbeyen
Keyword(s):  
Stock Exchange ◽  
Manufacturing Firms ◽  
Capital Management ◽  
Working Capital ◽  
Return On Assets ◽  
Working Capital Management ◽  
Operating Income ◽  
Cash Conversion Cycle ◽  
Operating Profit ◽  
Inventory Turnover

The efficiency of working capital management (WCM) has implications for firms’profitability. This paper empirically investigates the effects of WCM on the profitability of a sample of 48 large manufacturing firms quoted on the Nigerian Stock Exchange (NSE) for the period 1993 to 2005. It is aimed at filling the gaps in a previous study and contribute to expanding and enriching the literature particularly on Nigeria and at large. The analysis examined the responses of the firms’ profitability to WCM and a number of augmenting factors. Profitability was alternatively measured by gross operating profit (GOI), net operating income (NOI) and return on assets (ROA). Likewise, WCM was measured by the average collection period (ACP), average pay period (APP), inventory turnover days (ITID) and comprehensively by the cash conversion cycle (CCC). The results indicate that the firms’ have been inefficient with WCM and caused significant reductions in profitability. The paper concludes that improving the efficiency of WCM is essential and recommends that manufacturing firms in Nigeria should shorten the ACP, APP, ITID and reduce their CCCs.

scholarly journals Promoter ownership and working capital management efficiency of indian manufacturing firms

2015 ◽  
Vol 12 (2) ◽  
pp. 590-599
Author(s):  
Amarjit Gill ◽  
John D. Obradovich ◽  
Harvinder S. Mand
Keyword(s):  
Cash Flow ◽  
Financial Management ◽  
Stock Exchange ◽  
Manufacturing Firms ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Management Consultants ◽  
Cash Conversion Cycle ◽  
Management Efficiency

Poor cash flow leads to insolvency of the firm. One of the most important factors that lead to poor cash flow is the inefficiency of working capital management. This study investigates relationships between promoter ownership and working capital management efficiency of Indian manufacturing firms. A sample of 151 manufacturing firms was selected from Top 500 Companies listed on the Bombay Stock Exchange (BSE) for a period of five years (from 2010-2014). Results indicate that changes in promoter ownership play a role in changing working capital management efficiency of Indian manufacturing firms by reducing their cash conversion cycle and by improving cash conversion efficiency. This study contributes to the literature on the factors that cause changes in working capital management efficiency. The findings may be useful for financial managers, operations managers, investors, financial management consultants, and other stakeholders

scholarly journals The Impact of Working Capital Management on Profitability: Evidence from the Listed Retail Stores in Botswana

2018 ◽  
Vol 4 (1) ◽  
pp. 85
Author(s):  
Sathyamoorthi C.R. ◽  
Mogotsinyana Mapharing ◽  
Popo Selinkie
Keyword(s):  
Stock Exchange ◽  
Financial Statements ◽  
Retail Stores ◽  
Capital Management ◽  
Working Capital ◽  
Return On Assets ◽  
Working Capital Management ◽  
Cash Conversion Cycle ◽  
Conversion Period ◽  
The Impact

This study focused on the effect of working capital management on the profitability of the listed retail stores in Botswana Stock Exchange for the period 2012-2016. Financial statements of the listed Retail Stores were used as the main source of data. Return on Assets was used as the dependent variable to measure profitability and the components to measure working capital management comprised of Average Collection Period, Inventory Conversion Period, Average Payment Period, Cash Conversion Cycle, Debt, Current and Quick Ratios. Correlation analysis revealed that a few variables were significantly correlated with each other. Average Payment Period and Inventory Conversion Period were found to be positively and significantly correlated and Cash Conversion Cycle was significantly and positively correlated with Inventory Conversion Period.The regression results showed that only three variables out of the seven independent variables were statistically significant, namely Average Payment Period, Current Ratio and Quick Ratio. The remaining four variables were found to be statistically insignificant.  The above findings have implications for the management of the listed retail store in Botswana.

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 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 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.

Modifying the cash conversion cycle: revealing concealed advance payments

2014 ◽  
Vol 63 (3) ◽  
pp. 341-353 ◽  
Author(s):  
Anna-Maria Talonpoika ◽  
Sari Monto ◽  
Miia Pirttilä ◽  
Timo Kärri
Keyword(s):  
Empirical Data ◽  
Stock Exchange ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Content Type ◽  
Remarkable Effect ◽  
Cash Conversion Cycle ◽  
Accounts Payable ◽  
Business Practitioners

Purpose – The cash conversion cycle (CCC) is widely used in the academic studies of working capital management and supply chain efficiency. The purpose of this paper is to introduce a modification of this measure that takes into account advance payments as a component of operational working capital. Design/methodology/approach – A new measure, the modified cash conversion cycle (mCCC) is introduced and tested with empirical data of companies in Helsinki Stock Exchange. Findings – The mCCC reveals the real efficiency of operational working capital in companies that receive advance payments to a remarkable extent. Research limitations/implications – The mCCC can be used in empirical analysis in academic studies. In this paper, the empirical data are used only for testing the mCCC. The paper concerns received advance payments, but the mCCC can also be extended also to other components of operational working capital ignored by the traditional CCC. Practical implications – The paper offers insights into the variations of CCC for class teachers, and business practitioners, particularly financiers, who deal with operational working capital, cash flow predictions and calculations. Originality/value – There are current items that may have a remarkable effect on operational working capital, but traditionally only inventories, accounts receivable and accounts payable are discussed. The authors argue that also other current items should be taken into account, if they affect the efficiency of operational working capital. The new mCCC is encouraged to be used instead of the CCC when observing working capital management.

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