Assessing the effect of Working Capital Management on the Business Profitability.
Abstract
Management of working capital play very essential role in the firm’s profitability. Therefore, this study aims to inquire the impact of working capital management on firm’s profitability. For measuring working capital management inventory conversion period, debtor’s conversion period, creditor’s conversion period, cash conversion cycle, and cash conversion efficiency are taken as independent variables. Firm’s profitability is measured by using the four dependent variables which are net profit margin, return on assets, return on equity, and return on capital employed. Regression analysis is used to discover the impact of working capital management on firm’s profitability by using secondary data. This data is gathered from annual reports of 25 companies listed at NSE for five years from 2008-2012. Manufacturing industry is selected because major portion of total assets contain current assets so working capital management efficiency is necessary in this industry. From results of this study, working capital management has significant impact on firm’s net profit margin, return on assets, and returns on capital employed and insignificant impact is find out on return on equity of firms. Therefore, it is concluded that working capital management has significant impact on firm’s profitability in food sector. It is concluded that if firms in food sector efficiently manage working capital then, firm’s profitability is enhanced. This study also find descriptive statistics which tells how well performance of firms in food sector is and how efficiently these firms are managing working capital.
Downloads
References
Alipour, M. (2011). Working capital management and Corporate profitability : Evidence from Iran. Worldapplied sciences journal ,vol 12 (7), 1093 - 1099.
Damuletiu, A. E. (2010). Working capital management and profitiability : A case of ALBK county companise . 364 - 374.
Dr. Muhammad Azam, s. i. (2011). impact of working capital management on firm performance. interdisciplinARY journal of contemporary research in business, 2, 481.
Napomech, K. (2012). Effect of Working Capital Management on the Profitability of Thailand listed firm.
International journal of trade ,Ecnomices and Finance, vol, 3 , 227 - 232.
O.N, A., &Ramanan, T. R. (2013 ). Working capital management and profitability ;Asenitivity analysis.
International journal of research and development _ Amanagement review, vol _ 2 (issue _ 1), 52 -58.ALI,S. (2011) Working Capital Management and the Profitability of the Manufacturing Sector: A Case Study of
Pakistan’s textile industry the lahore journal of economics 141–178.
Dănuleţiu1, a. E. & (2010) working capital management and profitability: a case of alba county companies 12(1), 364 – 375.
Deloof*, m. (april/may 2003) does working capital management affect profitability of belgian firms? Joimial of business fiiunife if .aicmmting,,30(.^) & (4), 573 – 587.
Sonia baños caballero, p. J. G. T., pedromartínezsolano the impact of working capital financing on firm’s profitability 1 – 26
Ali, s. (2011) working capital management and the profitability of the manufacturing sector: a case study of pakistan’s textile industry the lahore journal of economics 141–178
Amarjitgill , n. B., neilmathur , & ( 2010,) the relationship between working capital management and profitability: evidence from the united states business and economics journal, volume 2010: bej-10 ,, 1 – 9
Mohammad morshedurrahman (january–june, 2011 ,) working capital management and profitability: a study on textiles industry ,. Asa university review,, vol. 5 no. 1,, 116 - 132.
Erik rehn (2012) effect of working capital management on company profitability,. 1 – 71.
Amarjit gill, nahumbiger and neilmathur, “the relationship between working Capital management
And profitability: evidence from the united states”, business and economics journal, volume 2010:
Bej-10, pp. 1-9, 2010.
Haresh, b. (2012) working capital management and profitability: evidence India– an
Empirical study.Gfjmr vol. 5 1 - 16
Ali, s. (2011) working capital management and the profitability of the manufacturing sector: a case study of pakistan’s textile industry the lahore journal of economics 141–178
Mohammed, n. ( 2011 ) the effect of working capital policies management on firms’ profitability 1 - 90.
Pedro juangarcía-teruel and pedromartínez-solano effects of working capital management on sme profitability,.*financial support from fundacióncajamurcia is gratefully acknowledged.,1 – 20
Abdul raheman , t. A., abdulqayyum and mahmoodahmedbodla ( 2010 ) working capital management and corporate performance of manufacturing sector in pakistaninternationalresearch journal of finance and economics 152 - 163.
Dănuleţiu1, a. E. &( 2010 ) working capital management and profitability: a case of alba county companies 12(1), 364 – 375
Afza, t., nazir, m., 2009. Impact of aggressive working capital management policy on firms’ profitability, the iup journal of applied finance, 15(8), 20-30
Erik rehn (2012) effect of warking capital management on company profitability,. 1 – 71.
Ali, s. (2011) working capital management and the profitability of the manufacturing sector: a case study of pakistan’s textile industry the lahore journal of economics 141–178
Copyright (c) 2018 IJRDO - Journal of Business Management (ISSN: 2455-6661)
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Author(s) and co-author(s) jointly and severally represent and warrant that the Article is original with the author(s) and does not infringe any copyright or violate any other right of any third parties, and that the Article has not been published elsewhere. Author(s) agree to the terms that the IJRDO Journal will have the full right to remove the published article on any misconduct found in the published article.
