Effect of working capital management on the profitability of selected quoted firms study in nigeria. The study of working capital management as a financial. In respect of smes, 4 emphasized in his recent study the importance of management of working capital in terms of financial performance in smes to be increased. This article examines the impact of working capital management on firms profitability within the context of pakistan sugar and leather companies. The regression analysis was calculated on a panel sample of 255 companies listed on the stock exchange of thailand from 2007 to 2009. Using the pearson bivariate correlation and regression analysis, the study reported current ratio cr as the significant factor influencing the profitability of cement manufacturing firms in. Working capital turnover ratio, collection period, return on asset, consumer product firms, malaysia 1. Anova analysis is done to study the impact of working capital management on profitability.
Impact of working capital management on profitability case study of sugar and leather firms 1 3. Evidence from malaysian listed manufacturing firms, international journal of economics and financial issues, 2017, pp. This study investigates how public listed firms in the netherlands manage their working capital. Extensive research work has been done using these two variables in similar types of study. Impact of working capital management on the profitability. Accordingly, the impact of working capital management on the firms profitability. The impact of aggressive working capital management policy. Equally important, the outcome of the study will be of benefit to managers in organization on what strategy to employ regarding working capital management in other to improve the performance of the organization.
Effect of working capital management on firm profitability. The effect of working capital management on profitability. This study aims to find out the impact of working capital management on profitability. To find out the impact of management policies on the relationship of wcm and profitability of firm. Other variables that are used in this study are current. Working capital management wcm, cash conversion cycle ccc, account receivable ar. To empirically satisfy this, this paper examined working capital management and firms profitability in nigeria quoted firms on nigerian stock exchange nse. Working capital policies, working capital management, firm profitability, financial constraints, financial crisis, public listed firms, amsterdam stock. The impact of working capital management on corporate. Significance of the study as earlier said, short term financing plays vital role in the economic position of the firms of which working capital is the major part. Melita, maria and petros 2010 empirically investigated the effect of working capital management on firms financial performance in an emerging market. Deloof 2003 investigated the relationship between working capital management and corporate profitability for a sample of 1,009 large belgian nonfinancial firms from 1992 1996. They hypothesized that working capital management leads.
The impact of working capital management on firm profitability. A case study on consumer products firms in malaysia article pdf available november 2016 with 1,437 reads how we measure reads. Working capital management has lately been a hot topic since the financial turmoil of the late 2000s. The purpose of this research is to investigate the relationship between the working capital components and corporate profitability in different industries. This comparison investigates whether companies have to change their non. Working capital management plays a significant role in improved profitability of firms. The positive relationship between working capital management and firms performance was confirmed by the authors. Account payable turnover and firms profitability but such relationship have not been identified for textile spinning companies in pakistan. Abstract in this research the researcher attempt to take result of comparison among industries based on working capital management. We find the impact of business cycle on the working capitalprofitability relationship is more pronounced in economic downturns relative to economic booms.
Other subobjective of the study is that it adds more literature to the impact of wc management on firms profitability. Generally current assets of a firm include cash, ar, and. Annual data of 41 firms are used for the period 20052016 in the study. The relationship between working capital management efficiency and profitability is examined using correlation and regression analyses.
Working capital management and firms profitability. Impact of working capital management on firms performance. Thus, efficient working capital management is very important for smaller firms peel and wilson, 1996. The purpose of the study was to examine the effect of working capital management on firms performance.
Their findings implied that the variables of the working capital management and profitability are inversely associated. Impact of working capital management on profitability in. Empirical analysis of working capital management and its. Impact of working capital management on the performance of. Kargal and blue manthal 1994 state that the profitability and liquidity tradeoff is. The impact of working capital management on firms profitability. Effect of working capital management on the profitability. Working capital to the company is like the blood to human body. In light of this objective the study adopts quantitative approaches to test a series of research hypotheses. Effects of working capital management on firm performance. Samiloglue and demirnes 2008 tried to find whether the profitability and working capital management of a sample of turkish listed firms are related.
This study aims to reveal the tradeoff between working capital components and firms profitability by using the data of the firms listed on borsa istanbul industry index in turkey. Azam and haider, 2011 conducted research on impact of working capital management and firms performance as well as. Thus, this study examined the impact of working capital management on firms. The purpose of this study is to quantitatively aggregate the findings of prior literature on the effect of working capital management wcm on. Relationship between profitability and working capital management. The primary objective of this research was to test the effects of working capital management on profitability. Effects of working capital management on company profitability abstract. Impact of working capital management on the profitability of public. The effect of working capital management on firms profitability core. Therefore, the present article tries to examine the impact of working capital management on profitability of the firms of indian steel industry.
Companies search for liquidity and operational efficiency through minimizing their investment in. Impact of working capital management on the profitability of cooperative unions in east showa, ethiopia natarajan vallalnathan and getachew joriye department of cooperatives, institute of cooperatives and development studies, ambo university, ambo, post box no. Analysis of the effect of working capital management on. On the other hand, 5 determined that smes often used equity, low, and they couldnt provide sufficient employment. In spite of its importance, there is a serious dearth of literature on working capital management and profitability especially in subsaharan africa, particularly nigeria. The working capital policies during the noncrisis period of 20042006 and during the financial crisis of 2008 and 2009 are compared. This research work is conducted in order to analyze the effect of working capital management on profitability, in detail, in the manufacturing firms of pakistan listed on karachi stock exchange. A research conduct on topic impact of working capital management on profitability of the food and personal care products sector in pakistan from above stated purpose, succeeding exact research questions were framed to investigate.
Accordingly, the impact of working capital management on the firms profitability is tested by using panel data methodology. The main aim of this study is to investigate the relationship between working capital management wcm and firms profitability in the food sector of. It is an indicator of measuring the liquidity in terms of cash required to meet the companys obligations. Data is obtained from the annual reports of 122 firms listed in the industrial. Firms can achieve optimal management of working capital by making the tradeoff between profitability and liquidity. Evidence from the topfive beer brewery firms in the world. Pdf effect of working capital management on profitability. The effect of working capital management on firms profitability. It is very important and plays a vital role for firms.
So a firm has to plan the effective utilisation of its working capital in order to maintain equilibrium between liquidity and profitability of the business. When the cash conversion cycle increases it leads to decrease the profitability of the firm 12. Return on assets is used as a proxy of profitability. Impact of working capital management on firms profitability. He also determines proof that the rate of increase in firms profitability is less than from decrease in working capital. Using panel data analysis, pooled ols and fixed effect estimation, for a sample of singapore firms from 2004 to 2011, we find that managers can increase profitability by managing working capital efficiently. Working capital management efficiency is vital especially for manufacturing firms, where a major part of assets is composed of current assets 1. Results of this research show that aggressive working capital. This study investigates the mediating effect of the companys profitability on the link between the aggressive working capital management policy and the value of the firm. This study shows the link between the working capital management and profitability with the indirect effect of management policies effectiveness under the context of pakistan textile industry for which data have been taken from period 20062012. A sample of 37 firms is used, which are among the fifty largest companies in the netherlands.
Impact of working capital management on performance 6 proceedings of 2 nd international conference on business management isbn. The purpose of this research is to investigate the effect of working capital management on firms profitability. The study examined the impact of working capital management wcm on the profitability of petroleum retail firms prfs in ghana over a six year period 200820. The objective of the current work is to provide empirical evidence about the effects of working capital management on profitability for a panel data of 48. It was observed by venkatraman and ramanujana that business economic performance is being measured by using sales growth, net income growth and return on investment. Empirical evidence from borsa istanbul article pdf available july 2016 with 3,975 reads how we measure reads. It is a sensitive area in the field of financial management because it can affect the firms success. Over the years, it appeared that firms failed to subject shortterm investments to proper management thereby leading to either excessive or inadequate working capital which in turn affected their profitability. As it affects the profitability of firm working capital management explicitly impacts both the profitability and level of desired liquidity of a business. Impact of working capital management on the performance.
Abstract this study examined the effect of working capital management on the profitability of selected quoted firms in. Working capital management refers to the management of the shortterm assets of a business. The sample was taken from amman stock exchange for the period 2000 to 2008. In respect to the importance of working capital management and inadequacy of research work on bangladeshi textile industry, it is needed to examine working capital management of textile companies listed in the dhaka stock exchange based on previous studies, which was done in other countries. He finds that profitability and working capital management have negative impact on positive relationship. This study investigates the relationship between working capital management and firms profitability of malaysian listed manufacturing firms. This study aims to examine the impact of working capital management on firms performance of textile spinning sector in pakistan listed in kse 100.
Effects of working capital management on profitability. A sample of three 3 manufacturing companies listed on. Raheman, afza, qayyum, and bodla analysed the working capital management practices and their impact on corporate. Working capital management wcm is an important corporate financial decision since it directly affects the liquidity and profitability of the firm. Introduction a good number of firms have put sufficient cash in working capital. The working capital components and firms profitability tradeoff was examined via the fixed effects panel regression model. Almazari 20 investigated the impact of working capital management on profitability of cement manufacturing firms listed in the saudi stock exchange. In this paper we examine the role of business cycles on the working capitalprofitability relationship using a sample of finnish listed companies over an 18year period.
According to my knowledge and searches within the databases of scientific articles which are available to me, there are no authors who studied the impact of working capital management on a firms profitability during crisis. Pdf the impact of working capital management on firm. However, all the above mentioned authors have studied the impact of working capital management during noncrisis periods. The study has been conducted to 158 nonfinancial firms which have managerial ownership and listed on the indonesia stock exchange from 2012 to 2015. The results of this study revealed that there is no statistically significant relationship between cash conversion cycle measurements and profitability of firms. It aims to examine the impact of working capital management from the aspects of aggressive working capital policy and efficiency of working capital management.
Jude leon officer, union bank of colombo plc, sri lanka. Impact of working capital management on profitability and. Impact of working capital management on performance of. The study aims at examining the statistical significance between companys working capital management and profitability. The impact of working capital management on profitability. This paper analyzes the effect of working capital management on firms profitability in kenya for the period 2003 to 2012. This study will try to provide an understanding of how firms can manage their working capital in an optimal way during a crisis. Pdf this study investigated the impact of working capital management on the profitability of fifteen listed fuel and power companies in. Cash converison cycle which is used as a comprehensive. To find out the impact of dwc on firms profitability.
In this study, 172 companies were selected as samples. The effects of working capital management on firm profitability diva. Working capital management is very important for a firm to maintain its performance. This study analyses the working capital management efficiency of firms from telecommunication equipment industry. Pdf impact of working capital management on firms profitability. In the literature research, on the relationship between working capital management and firms profitability abound. The significance of working capital management has been a common opinion among researchers. Pdf on jul 1, 2016, mehtap oner and others published the impact of working capital management on firm profitability. The working capital management has implications on the firms profitability and risk as well as its value. Mauritian firms for a six year period covering 1998 to 2003. The purpose of this study is to find out the effect of working capital management on company profitability.
1293 1531 651 671 523 1117 1392 642 561 604 601 353 262 153 680 595 591 88 665 410 34 1289 880 337 948 904 1587 1038 878 620 232 1123 297 1112 247 1587 1288 536 1374 1294 525 1454 667 1478 572 1163 258 784