The Relationship between Working Capital Management and Cash Flows on the Financial Performance of Manufacturing Firms

2016 ◽  
Vol 6 (6) ◽  
pp. 34
Author(s):  
Abdolkarim Moghadam ◽  
Mehran Rahimi
Keyword(s):  
Financial Performance ◽  
Cash Flows ◽  
Manufacturing Firms ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
The Relationship

scholarly journals Is working capital management able to increase sustainable growth through asset utilization?

2020 ◽  
Vol 17 (2) ◽  
pp. 136-146
Author(s):  
Yekti Kinasih ◽  
Rambu Dorkas ◽  
Supramono Supramono
Keyword(s):  
Stock Exchange ◽  
Manufacturing Firms ◽  
Sustainable Growth ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Panel Data Regression ◽  
Data Regression ◽  
Strategic Role ◽  
The Relationship

Working capital management has a strategic role to maintain a balance between liquidity and profitability so that firms have greater opportunities to operate sustainably. This study mainly aims to investigate the ability of working capital management to increase sustainable growth through asset utilization. We ran panel data regression on manufacturing firms listed in the Indonesian Stock Exchange for the years of 2010-2017 as our sample. By controlling for leverage, sales growth, and firm size, our empirical results demonstrate that working capital management negatively affects firms' asset utilization. Furthermore, the study also finds that asset utilization positively affects sustainable growth. Finally, we empirically show that asset utilization mediates the relationship between working capital management and sustainable growth. The findings imply that if Indonesian manufacturing firms manage to have efficient working capital management, they are more likely to utilize their assets efficiently which, in turn, will increase their growth optimally, without causing problems to their cash.

scholarly journals Working Capital Management Issues in Educational Sector: A Case Study of a Private Campus in Sri Lanka

2021 ◽  
pp. 30-45
Author(s):  
Kaushika Gamage ◽  
Vilani Sachitra
Keyword(s):  
Financial Performance ◽  
Thematic Analysis ◽  
Qualitative Data ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Cash Conversion Cycle ◽  
The Relationship ◽  
Management Issues

Business organizations try to maintain financial sustainability in the long run and ultimately try to maximize shareholders’ wealth. It has been argued that financial constraints in short term are a major barrier to the firms’ long term financial success. Working capital has seen as the basic factor that affect firm’s ability to continue their day-to-day business operations with financial stability. This case study mainly focuses on examining the reasons for working capital management issues faced by the Campus and the relationship between working capital and firm’s financial performance. This study is mainly focusing on working capital problems faced by a private Campus that operates in Sri Lankan educational sector. Required qualitative data gathered through semi-structured face to face interviews with financial experts and the quantitative data gathered using annual financial statements for last six years. Panel data regression was performed to identify the relationship between working capital management and financial performance. Qualitative data was analyzed using content and thematic analysis. Based on the regression results, average collection period, average payment period and cash conversion cycle have significant relationship over return on assets and net profit margin of the Campus. Five major themes were recognized in the thematic analysis which contained distinct subthemes. As the existing research articles lack the working capital management issues faced by the organizations in private education industry, this can be considered as an opportunity to perform an empirical study on working capital management issues faced by a private campus.

scholarly journals Exploring the Relationship between Working Capital Management, Profitability and Capital Structure

2017 ◽  
Vol 2 (1) ◽  
pp. 38-45
Author(s):  
Abdalla Geth Abdussalam ◽  
Mohd Ridzuan Darun
Keyword(s):  
Capital Structure ◽  
Empirical Studies ◽  
Relevant Literature ◽  
Cash Flows ◽  
Jel Classification ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Main Component ◽  
The Relationship

Objective - This paper explores the relationship between working capital management (WCM), profitability and capital structure. A preliminary framework provides an understanding of the role of WCM components with capital structure and profitability. Methodology/Technique - From the review of empirical studies it is confirmed that WCM is a main component in the financial aspects of the firms as even though WCM is targeted for the short-term decisions it has effect on the firm for the long-run. Findings - Companies need to use working capital policy and procedures in order to navigate performance. Emphasizing on WCM would lead to formal cost controls and performance together with firm's growth and productivity. The framework is set to help financial manager of the firms to balance the costs and benefits of debt and equity and reduce common obstacles on managing cash flows for long-term fixed investment. Novelty - The preliminary framework is original and unique that will contribute towards the enrichment of relevant literature. Practically, this study contributes to provide a better understanding of the managers and enable them to apply WCM strategies and make sure the firm is able to meet the stakeholder requirements. Type of Paper Review Keywords: Working Capital Management; Capital Structure; Profitability; JEL Classification: O16, M41.

scholarly journals The Moderating Effect of Working Capital Management on the Relationship between Working Capital Determinants and Firm Performance

2018 ◽  
Vol 2 (1) ◽  
pp. 38-48
Author(s):  
Ahmad Rizal Mazlan ◽  
Choong Yuen Leng
Keyword(s):  
Firm Performance ◽  
Manufacturing Firms ◽  
Management Model ◽  
Capital Requirement ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Research Framework ◽  
The Relationship ◽  
Moderating Role

This research examines working capital management moderating role on the relationship between the key determinants of working capital and firm performance among 282 public-listed manufacturing firms in Malaysia for the period of 2010 to 2014. In this study, working capital management components are categorized into working capital requirement and net liquid balance. The evidence suggests that the relationship between critical determinants of working capital and firm performance is moderated by both working capital requirement and net liquid balance. Further, the results show that the research framework does form a contemporary working capital management model.

scholarly journals Impact of Working Capital Management on Financial Performance of Firms: Evidence from Pakistani Firms

2019 ◽  
Vol 5 (2) ◽  
pp. 24
Author(s):  
Sarfaraz Bhutto ◽  
Zulfiqar Ali Rajper ◽  
Riaz Ahmed Mangi ◽  
Ikhtiar Ali Ghumro
Keyword(s):  
Financial Performance ◽  
Multiple Regression ◽  
Negative Impact ◽  
Positive Impact ◽  
Stock Exchange ◽  
Manufacturing Firms ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Independent Variable

This study aims to investigate the impact of working capital management on the financial performance of firms. We have taken non-financial sector which is listed in Pakistan stock exchange (PSX) over the period of 2010 to 2015. We have sampled 50 firms listed is PSX. The secondary data is being collected from the publication of State bank of Pakistan (SBP) “Financial Statement analyses of Non-financial sector listed in Pakistan stock exchange 2010-2015”. Furthermore, we have used purposive sampling method to choose the selective firms in manufacturing industry of Pakistan. Moreover, Pearson correlation and multiple regression are used as data analyses techniques. The study variables consist working capital management as independent variable and financial performance as dependent variable. We have used proxies to compute independent variable like Average payment period (APP), inventory turnover (ITO), cash conversion cycle (CCC) and average collection period (ACP). Moreover, financial performance (dependent variable) measured as earnings per share (EPS), return on equity (ROE) and return on assets (ROA). It is observed in the results that there is significant and negative impact of APP and ITO on ROA but two independent variables CCC and ACP have significant and positive impact on ROA. Moreover, it is found that CCC, APP and ITO have significant and negative impact on ROE and EPS respectively. Lastly, it is observed that ACP has a significant and positive impact on ROE and EPS. The results of multiple regression investigated that the financial performance of Pakistani manufacturing firms is consistent with WCM. This study supports in managing the working capital requirements to boost firm performance in general. Moreover, specifically in the context of Pakistani manufacturing firms the study implications are significant in expansion and betterment of financial performance of firms

Analysis of Working Capital Efficiency in Cipla Ltd.

2014 ◽  
Vol 4 (1) ◽  
Author(s):  
Dr. Shishir Pandey ◽  
Dr. Avadhesh Kumar Verma ◽  
Sunil Kumar
Keyword(s):  
Cash Flows ◽  
Cycle Period ◽  
Capital Management ◽  
Working Capital ◽  
Short Term ◽  
Operating Cycle ◽  
Working Capital Management ◽  
Management Efficiency ◽  
Capital Efficiency ◽  
The Relationship

Decisions relating to working capital involve managing relationships between a firm’s short-term assets and liabilities to ensure a firm is able to continue its operations, and have sufficient cash flows to satisfy both maturing short-term debts and upcoming operational expenses at minimal costs, increasing firm’s profitability. The working capital very much associate with the operating cycle. A perusal of the operating cycle good reveal that funds invested in the operation are recycled back in to cash. The shorter the period of operating cycle the larger will be the turnover of the funds invested in various purposes. The shorter period of operating cycle shows better efficiency of a firm. The efficiency of working capital management can be determined by the operating cycle of the firm. This paper aims at analyzing the efficiency of working capital management through the relationship between operating cycle period and profitability of Cipla Ltd. To measure the Working Capital Management Efficiency, Operating cycle has been calculated and the relationship is made with Gross Profit Ratio.

scholarly journals Packages or systems? Working capital management and financial performance among listed U.S. manufacturing firms

2020 ◽  
Author(s):  
Hakim Lyngstadaas
Keyword(s):  
Financial Performance ◽  
System Approach ◽  
Qualitative Comparative Analysis ◽  
Manufacturing Firms ◽  
Capital Management ◽  
Working Capital ◽  
Data Set ◽  
Working Capital Management ◽  
Panel Data Regression ◽  
Data Regression

AbstractThis study examines how working capital management packages (WCMPs) can lead to higher financial performance. This is done by exploring the formation, importance, and systematic interdependencies within and between WCMPs. The data set consists of 589 U.S. listed manufacturing firms that are being studied during the fiscal period 2012–2019. WCMPs are studied from both a package and a system approach. This is done by combining fuzzy set qualitative comparative analysis and panel data regression. In all, 11 effective WCMPs are found to be associated with high financial performance. Six of them constitute unique and empirically important packages and are also identified as systems. The findings can have consequences for managers and practitioners, as the study creates an explicit link between a firm’s working capital management and financial performance.

scholarly journals THE EFFECT OF WORKING CAPITAL MANAGEMENT ON FINANCIAL PERFORMANCE AND OPERATIONAL CASH FLOWS OF COMPANIES ACCEPTED IN TEHRAN SECURITIES EXCHANGE

2019 ◽  
Vol 7 (6) ◽  
pp. 625-632
Author(s):  
Ali Asghar Sameni ◽  
Razieh Fakour
Keyword(s):  
Financial Performance ◽  
Cash Flow ◽  
Cash Flows ◽  
Net Income ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Operating Profit ◽  
Operating Cash Flow ◽  
The Difference

Purposes: Working capital management can have a huge impact on financial performance and operational cash flows. In this research, the effect of working capital management components on financial performance and operating cash flows have been investigated. Methodology: The data used in this study are financial statements of companies listed in Tehran securities exchange for the period 2007 to 2011. Results: The difference between sales and operating profit as a benchmark for measuring performance and the difference between operating cash flow and operating profit as a measure of operating cash flow has been used. Regression results show that there is no meaningful relationship between the components of working capital management with financial performance and operating cash flow. Implications/Applications: Net income represents the change in a business's financial circumstances incurred through that business choosing to run its revenue-producing operations for one specific time period. Because the business cannot choose to run its revenue-producing operations without incurring expenses while doing so, net income is equal to revenues minus expenses. Expenses are often divided up into additional categories for ease of comprehension. Revenues minus cost of sales is equal to gross profit; gross profit minus operating expenses is equal to operating profit. Novelty/Originality: The novelty of this study is a balance between current assets and current liabilities, as well as maintaining a balance between profitability and liquidity which can serve a great purpose in the economy.

scholarly journals Working Capital Management and Financial Performance of Private Hospitals in Western Uganda: The Mediating Effect of Competitive Advantage

2021 ◽  
Vol 6 (1) ◽  
pp. 12-23
Author(s):  
Muhindo Cranimar ◽  
Rwakihembo John
Keyword(s):  
Financial Performance ◽  
Competitive Advantage ◽  
Mediating Effect ◽  
Unique Contribution ◽  
Capital Management ◽  
Working Capital ◽  
Private Hospitals ◽  
Working Capital Management ◽  
Western Uganda ◽  
The Relationship

Purpose: This study aimed at examining the mediating effect of competitive advantage in the relationship between working capital management (WCM) and the financial performance of private hospitals in Western Uganda. Methodology: The study adopted a positivist approach and a cross-sectional research design to collect data from 32 Private hospitals in Western Uganda. A closed-ended questionnaire was used to collect data from hospital administrators, accountants, storekeepers and pharmacists in private hospitals who were purposively selected. Hierarchical multiple regression was used for data analysis. Findings: Results indicate that competitive advantage is a significant mediator in the relationship between working capital management and private hospitals' financial performance in Western Uganda. Unique Contribution to practice and policy: The study has deep-rooted the urgent need for private hospitals to adopt more innovative strategies to attain a competitive edge and hence superior financial performance. However, the study was positivistic, thus subject to methods bias that could have affected the results' validity. Keywords: Working Capital Management, Competitive advantage, financial performance

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