scholarly journals Impact of Working Capital Management on Firm’s Profitability: A Study on Listed Companies in Sri Lanka

2020 ◽  
pp. 42-58
Author(s):  
Vianny Jeniston Delima
Keyword(s):  
Regression Analysis ◽  
Sri Lanka ◽  
Correlation Analysis ◽  
Listed Companies ◽  
Descriptive Statistics ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Cash Conversion Cycle ◽  
Capital Financing

Aims: The main aim of the study is to identify whether working capital management has an impact on firm’s profitability of listed companies in Sri Lanka. Place and Duration of Study: Pooled panel data of 95 listed companies from 18 sectors are listed on the Colombo Stock Exchange (CSE) which comprised of 475 observations is used during the period of 2012/2013 to 2016/2017. Methodology: Descriptive statistics, Pearson’s Correlation analysis, ANOVA, and Pooled Regression analysis were employed as measures of analysis. Working capital management components and working capital policies are used as independent variables which comprised of number of days of account receivable (DAR), number of days of inventories (DI), number of days of account payables (DAP), cash conversion cycle (CCC), working capital investment policies (WCIP), and working capital financing policies (WCFP). Current ratio (CR), firm size (SIZE), sales growth (GROWTH), and Debt ratio (DR) were employed as controlled variables. Gross operating profit (GOP) and Return on assets (ROA) were used as dependent variable. Results: In the descriptive statistics, average of DAR, DI, DAP, and CCC are 64, 63, 97, and 29 days respectively. The average WCIP and WCFP are indicated as 40% and 27% of total assets. For control variables, the average CR, SIZE, GROWTH, and DR are indicated as 2.27, 14.50, 33% and 40%. In the Pearson correlation analysis, CCC has negative relationship with GOP and ROA. With regard to WCIP and WCFP, there are negative significant relationships with GOP and ROA. Regression analysis states that working capital management significantly impacts on firm’s profitability of listed companies in Sri Lanka. Conclusion: These findings would be useful to consider on maintaining optimal working capital management components and policies to avoid corporate collapse and to maximize firm’s profitability.

The Effect of Working Capital Management on Firm's Profitability

2016 ◽  
pp. 244-261
Author(s):  
Seda Erdogan
Keyword(s):  
Regression Analysis ◽  
Direct Effect ◽  
Optimal Strategy ◽  
Listed Companies ◽  
Panel Regression ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Trade Off ◽  
Cash Conversion Cycle

Working capital management is an extremely essential issue for the healthy conduct of the sustainability of a business. The active and day-to-day nature of the short term business emporium, the ongoing necessity to substitute current assets and in the meantime to liquidate current liabilities clearly demonstrates the significance of working capital management and therefore the essential duty the financial executives carry. While an optimal strategy of working capital management is expected to positively contribute not only to the profitability of a firm but also its value; there is a trade-off between the liquidity level the firm is carrying and its profitability. The direct effect of working capital management on profitability and liquidity of firms clearly demonstrates the significance working capital management has in a firm and consequently the objective of this chapter is to find whether or not working capital management, i.e. cash conversion cycle has an effect on profitability for the publicly listed companies in Turkey using panel regression analysis.

scholarly journals WORKING CAPITAL MANAGEMENT AMONG LISTED COMPANIES OF PAKISTAN

2017 ◽  
Vol 5 (2) ◽  
pp. 80-91
Author(s):  
Waqar Ul-Hassan ◽  
Mohsin Zubair ◽  
Zeeshan Hasnain ◽  
Shahbaz Hussain
Keyword(s):  
Stock Exchange ◽  
Pearson Correlation ◽  
Sample Selection ◽  
Selection Criterion ◽  
Listed Companies ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Operating Income ◽  
Cash Conversion Cycle

The study aims to investigate the strength of working capital management for measuring the financial performance of listed stocks. The study incorporates descriptive statistics, Pearson correlation, and multiple regression models for interpretation and execution of data. Five years (2006-11) panel data of 125 listed companies of Pakistan stock exchange (PSX) is selected in accordance to sample selection criterion. Results of regression analysis supported an inverse relationship between firm`s profitability and working capital management. Return on asset and Gross operation income are taken as indicators of profitability. Inventory turnover in days, Average age of A/R, Average payable period and Cash conversion cycle are considered as independent variables to measure firm’s profitability. Firm size, Sales growth, and financial debt ratio are favored as control variables. Overall Return on asset models indicated poor values of R-square`s and Gross operating income models showed robustness.

scholarly journals Working Capital Management and Firms’ Profitability: Evidence from Vietnam’s Stock Exchange

2016 ◽  
Vol 8 (5) ◽  
pp. 55 ◽  
Author(s):  
Huy-Cuong Nguyen ◽  
Manh-Dung Tran ◽  
Duc-Trung Nguyen
Keyword(s):  
Supply Chain ◽  
Stock Exchange ◽  
Listed Companies ◽  
Capital Management ◽  
Working Capital ◽  
Short Term ◽  
Public Companies ◽  
Working Capital Management ◽  
Cash Conversion Cycle ◽  
Macroeconomic Effects

<p>The paper investigates what effect Working Capital Management has on firms’ profitability by using the data from listed companies on Vietnamese Stock Exchange. The sample is collected from 127 public companies for the period of 9 years from 2006 to 2014. The research uses four variables to represent Working Capital Management, which are Day of Sales Outstanding (DSO), Day Sales of Inventories (DSI), Day of Payables Outstanding (DPO), and Cash Conversion Cycle (CCC). Moreover, in order to robust the result, the study also takes into the account the following variables: “Leverage, Growth, Tangibility, Size, Industrial Factors, and Macroeconomic Effects”, which were proven to have significant effects on firms’ profitability. The result implies that there is no correlation between Working Capital Management and firms’ profitability. Hence the conclusion is that Working Capital Management can help companies solve the short-term obligations and improve the efficiency by improving the supply chain and credit policies, however it has nothing to do with firms’ profitability of the companies in the sample.</p>

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 and Profitability: A Study of Selected Auto Ancillary Companies in India

2017 ◽  
Vol 4 (01) ◽  
Author(s):  
Bhaskar Biswas
Keyword(s):  
Regression Analysis ◽  
Capital Management ◽  
Working Capital ◽  
Multiple Correlation ◽  
Current Ratio ◽  
Working Capital Management ◽  
Cash Conversion Cycle ◽  
Correlation And Regression Analysis ◽  
Made In

The term working capital management refers to overall administration of all the current assets and current liabilities of the firm. Current ratio, days sales outstanding, days inventory, payables period, cash conversion cycle (CCC) are regarded as the measures of working capital management. An attempt has been made in the present study to evaluate the relation between working capital management and profitability of five selected auto ancillary companies in India viz, Bosch India, Motherson Sumi Systems Limited, Exide Industries Limited, Amara Raja Batteries and Wabco India Limited. Using Karl Pearson’s simple and multiple correlation, and regression analysis, it is found that only in case of Amara Raja Batteries there is significant correlation between profitability and factors of working capital management.

scholarly journals Does working capital determine firm performance? An empirical research of the emerging economy

2018 ◽  
Vol 2 (1) ◽  
pp. 14-33
Author(s):  
Naseem Ahamed
Keyword(s):  
Firm Performance ◽  
Listed Companies ◽  
Emerging Economy ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Listed Firms ◽  
Cash Conversion Cycle ◽  
Management Efficiency ◽  
The Relationship

The primary objective of this study is to examine the impact of working capital management efficiency on the financial health/well-being of a company measured in terms of firm value in the context of a rapidly emerging economy. This study applies a multivariate ordinary least square regression analysis on industry adjusted performance variable of 1532 Indian firms listed on the National Stock Exchange (NSE) for a period of 18 years (from 1999-2017). Not all of the 1532 firms selected for this study were listed during the whole period of study. Only 610 firms were listed at the beginning and gradually more and more companies started to get listed until eventually 922 more companies got listed to the initial tally of 610 listed firms making the total number of listed companies to be 1532 by the end of the study period. A total of 19862 firm year observations correspond to listed firms and 9246 firm year observations for unlisted firms making it a total of 29108 firm year observations. The findings of this study indicate that an efficient working capital management (proxied by Cash conversion cycle and components thereof) leads to better firm performance when adjusted for industry differences. It also shows that the relationship follows a curvilinear trajectory instead of a linear one as a change in sign in the coefficient of working capital management proxy (Cash Conversion Cycle) occurs and its square term and both are manifesting itself as significant in the listed companies. This is a co-relational study investigating the association between working capital management efficiency and firm performance. The findings of this study is based in an economy that is unique in its own right. Indian corporate landscape is replete with business groups and they dominate the market in terms of asset holding and market capitalization coupled with the existence of institutional gaps and weak legal enforcement mechanisms. All of which makes the Indian corporate landscape totally different from its more developed counterparts thus rendering the results not generalizable. The relationship between these variables should be verified in other economies taking their unique characteristics into account. This study to the best of the author’s knowledge is the first one to investigate the relationship between working capital management and firm performance on such a comprehensive dataset having 62 different industries in an emerging economy. The findings of the study are intended to be of use to financial managers, investors, financial management consultants, and other stakeholders.

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.

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