Abstract
The aim of this paper is to identify the relationships between measures of working capital management (cash conversion cycle /CCC/, working capital value /WC/ and the financial liquidity /CR/) and profitability of companies listed on the Warsaw Stock Exchange. The research material consisted of data of 326 companies from 1998–2016. The analysis revealed significant non-linear relationship between WC, CR and profitability. When WC and CR values grow, profitability increases, but at a slower pace. However, there is a linear negative relationship between CCC and profitability. The results are influenced by the industry and the GDP growth. This indicates that profit-driven entrepreneurs try to delay payments to suppliers. They pay off bank loans from the funds thus generated. This study contributes to the verification of theories linking profitability with working capital management with emphasis on the influence of the industry. The results have practical implications: companies with growing profitability should not lose sight of the shortening CCC when paying off short-term loans; in some industries decreasing profitability while CR values grow may mean problems with the efficient use of current assets.
Highlights
Research on corporate finance can be divided into two main areas
The main goal of the paper has been to determine the relationship between the measures of working capital management (WCM) and profitability of companies listed on the Warsaw Stock Exchange in Poland (WSE)
497 companies listed on Ho Chi Minh Significant, negative relationship between and Hanoi stock exchange in years net working capital (NWC) and firm
Summary
Research on corporate finance can be divided into two main areas. The first one is related to the long-term financial policy of enterprises (investments, capital structure, dividend policy and company valuation). It is an area of research undertaken for many years. The second research area, related to the short-term financial policy of enterprises, has been developing for a much shorter time. This subject began to interest researchers at the beginning of the 1980s. The scientific achievements and knowledge in this area are not so impressive (Chang, 2018; Singh et al, 2017)
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