Influence of Working Capital Management and Policy to Profitability of Retail Trading Sector in Indonesia

Working Capital (WC) is an important aspect of any firms because of its correlation to risk (liquidity) and return (profitability). This research examines the influence of WC Management and Policy (WCMP) to profitability of 21 listed retail trading sector firms in Indonesia from 2011-2020 using panel data regression. In this research, WC Management (WCM) is measured by Cash Conversion Cycle (CCC) and its components which are Days Sales Outstanding (DSO), Days Inventory Outstanding, and Days Payable Outstanding (DPO); WC Policy is measured current assets divided by total assets or referred to as WC Investment Policy (WCIP) and current liabilities divided by total assets or referred to as WC Financing Policy (WCFP); and profitability is measured by Earnings Before Interest, Tax, Depreciation, and Amortization Margin (EBITDAM). The results show that firms can increase EBITDAM by shortening CCC, primarily through shortening DIO and lengthening DPO. Further, firms may improve EBITDAM by adopting a conservative WC Policy instead of an aggressive one, which means having higher current assets and lower current liabilities with respect to total assets.

Working capital management and profitability of manufacturing companies in Kosovo

This article aims to demonstrate the profitability of the manufacturing companies in Kosovo impacted by the managing practices in the working capital. We use multiple regression analyses to estimate the effect of working capital indicators on profit. The Pearson correlation is used to calculate whether the variables are positively or negatively correlated and to what extent. The sample includes thirty-six manufacturing companies for the period 2012-2013. The data show that the increase in cash conversion cycle (CCC) and extension in the receivables term positively influenced operating profit and net return on assets. On the contrary, the increase in payables days had a negative effect on the operating profit and the net return on assets. The rise in inventory days led to increased profit. Therefore, the companies' competitiveness is maintained mainly by extending trade credit terms to their customers and keeping the cash engaged longer in operating activities.

DOES WORKING CAPITAL MANAGEMENT AFFECT THE PROFITABILITY OF CONSUMER GOODS MANUFACTURING FIRMS IN NIGERIA?

The study examined the effect of working capital management on profitability of consumer goods manufacturing firms in Nigeria between the periods 2009 to 2018. The study adopted ex-post-facto design to generate data from the audited financial statements of the selected companies. The population of the study comprised 24 listed consumer goods manufacturing companies, out of which 10 were purposively selected based on the availability of data. The surrogates for independent variables were Account Payable Period (APP), Account Receivable Period (ARP), Inventory Turnover Period (INVTP), Cash Conversion Cycle (CCC) and Sales Growth (SG) as a control variable while the proxy for profitability was Return on Asset (ROA). Descriptive and inferential statistics coupled with multiple regressions were adopted to analyze the data. The Random Effects Generalized Least Square showed that ARP, INVTP, CCC had a negative and significant relationship with ROA while APP, SG had a positive and insignificant relationship with ROA. The study concluded that timely collection of debts and shorter inventory turnover period with cash conversion cycle enhance profitability of consumer goods manufacturing companies. Hence, the study suggested that the management of the companies should implement efficient working capital management for improved profitability.

AGGREGATE AND DISAGGREGATE MEASURES OF OPERATING AND NON-OPERATING WORKING CAPITAL INFLUENCE ON FIRM PERFORMANCE: EVIDENCE FROM MALAYSIA

The study is aimed at investigating the following issues: firstly, whether the different types of working capital, namely operating and non-operating working capital influence the short-term (return on assets) and long-term (Tobin’s Q) firm performance differently, and secondly whether the different measures of operating working capital, namely disaggregated and aggregated (cash conversion cycle) operating working capital, influence the short-term (return on assets) and long-term (Tobin’s Q) firm performance differently. It uses the panel data of 208 listed non-financial firms in Malaysia covering the period from 2013 to 2017, and the data has been sourced from Datastream. It employs the panel corrected standard errors regression model. The study has found that quicker sale of inventory increased both the short-term and long-term performance of the firm. Likewise, faster collection of receivables increased the long-term, but not short- term, performance. However, prompter payment of payables increased both the short-term and long-term performance. The study has also found that the disaggregated working capital measures – inventory, receivables, and payables contributed to a more nuanced influence of working capital on performance, compared to the aggregated working capital. The study has provided novel evidence that– higher non- operating working capital increased firm performance.

Effect of Working Capital Management Decisions on Financial Performance

Collapse of companies in Kenya has been on the rise in the recent past. Far reaching endeavors to resuscitate these liquidating and ailing firms have generally been attributed on their corporate financial management decisions. Multinationals and KTDA managed tea firms in Kenya have been performing poorly in the recent past where audited financial statements and reports revealed a warning signal on its financial performance. Specific objectives of the study were to determine the effect of the accounts receivables period, accounts payables period, inventory conversion period, cash conversion cycle, financing policy, investing policy and moderating effect of ownership structure on financial performance. The study illustrated that accounts receivables collection period is negatively related to return on assets (? = -0.1299, p=0.0160), accounts payables payment period is negatively related to return on assets (? = -0.0843, p = 0.0070), inventory conversion period is negatively related to return on assets (?= -0.0623, p=0.0180), cash conversion cycle is negatively related to return on assets (? = -0.1107, p = 0.0030), financing policy is positively related to return on assets (? = 0.1589, p = 0.0000), investing policy is positively related to return on assets (? = 0.0291, p = 0.0000).

The Impact of Working Capital Management on the performance of Listed Firms: Evidence of an Emerging Economy

The aim/purpose of this scientific inquiry is to empirically examine the impact of working capital management (WCM) [cash conversion cycle (CCC), number of days inventory (INV), number of days account receivable (AR), number of days account payable (AP)] and control variables [sales growth (GROW), size (SIZE), leverage (LEV), current ratio (CR) fixed financial assets to total assets (FFA)] on firm performance (FP) [ROA, Tobin’s Q (TQ)] in the context of an emerging economy, Ghana. The research used a dynamic panel System of Generalized Method of Moment (GMM) to test the hypotheses. Utilizing financial data extracted from final accounts of 36 listed companies, spanning 2010-2019, the study examined WCM-performance-nexuses by following the methodologies of researchers/scholars in extant literature. Findings/Results indicates that, whilst INV, AR, LEV demonstrated negative/inverse/indirect associations with FP; AP, GROW, SIZE, CR, FFA depicted positive/direct associations with FP. CCC however, exhibited a quadratic concave relationship with ROA.

Firm Profitability And The Administration Of Working Capital: Delving Into A Case Of The Cement Sector Of Pakistan

This study endeavors to establish an association between the administration of working capital and firm returns in Pakistan’s cement sector. Ten companies listed in the cement industry of KSE 100 Index were taken from Pakistan Stock Exchange randomly. Financial data in secondary form was collected from the financial reports of cement firms of the country. The study employed return on assets as an explained variable and inventory turnover period in days, collection period in days, payment period, cash conversion cycle, sales in log, and liquidity ratios as explanatory variables while controlling for the influence offirm’s size and firm’s growth in terms of sales. It was found that the current ratio, log of sales, cash conversion cycle and inventory conversion period positively influenced the return of companies whereas size of the firm, collection period of receivables, payment period to creditors and the debt ratio of firms had a negative influence on it.

Working Capital Optimization: A Supply Chain Perspective

The reason for this study is to examine the effect of working capital optimization on the efficiency of Iraqi companies across various industries. The study uses least square model and panel data used for four industries. The analysis gives empirical confirmation that cash conversion cycle used as a proxy of working capital and impact significantly and negatively impact on profitability of the firm and also firm level control factor age and industry influence on the firm performance. Such results indicate that administration can improve organizational profitability by reducing its working capital. The findings of this study can be examined in various socio-economic and industrial contexts. This research is limited to the Iraqi context. This research applies the existing body of information to investigate a panel data set in the context of a developing economy by using the regression equation. This innovative research explores empirically the effect of working capital management on the performance.

THE EFFECT OF CASH CONVERSION CYCLE ON THE PROFITABILITY OF THE RETAIL TRADE SECTOR COMPANIES

One of the company's goals is to increase company value. In order to achieve these goals the company must increase its profitability. To increase profitability, companies have to manage working capital effectively and efficiently. The effectiveness of working capital management can be measured using the Cash Conversion Cycle (CCC). CCC consists of Days Sales Outstanding (DSO), Days Sales Inventory (DSI), and Days Payable Outstanding (DPO). This study aims to determine the effect of the CCC and its components on company profitability. The type of data used in this study is secondary data which are collected from of corporate financial reports. The population in this study are retail trading companies listed on the Indonesia Stock Exchange during the 2015-2019 period. The data analysis method used in this study is the multiple linear regression method for panel data and simple linear regression for panel data. The results showed that partially, DSO, DSI, and CCC had a negative effect on company profitability. Meanwhile, the DPO has a positive effect on company profitability. Simultaneously, DSO, DSI, and DPO have an effect on profitability. Therefore, companies need to pay attention to the CCC and its components (DSO, DSI, and DPO) and manage it properly.