Abstract
This study aims to investigate the impact of Working Capital Management on Profitability with special reference to the Consumer Staples Sector firms in Sri Lanka. Further, this sector displayed a considerable growth potential in Sri Lanka. This study is adopted in a quantitative research approach. Data were drawn from a sample of 46 Consumer Staple Sector firms listed in the Colombo Stock Exchange (CSE) for a period of five years commencing from 2014/2015 to 2018/2019. To test the hypothesized relationships between the constructs, the panel data analysis is performed using STATA. The study found that the Inventory Conversion Period has an insignificant negative impact on Profitability. Receivables Collection Period negatively and significantly impact the Profitability. Further, the study observed that the Payables Settlement Period has an insignificant positive impact on Profitability and observed a significant positive impact of the Current Assets Ratio on Profitability. The findings are useful to investors, managers and shareholders when making decisions regarding the firm’s profitability under aforementioned sector. This study is a contribution to the existing body of knowledge on Working Capital Management and it impact on the Profitability of listed companies in the Sri Lankan Consumer Staples Sector since the researchers used the recent data in the data analyzing process. Further, this paper is limited to the analysis of data obtained for five years by forty-six companies only. The time period and sample can further be increased by future researchers in order to broaden up the scope of the study.
Highlights
Investors all over the world invest their money in a business to get some return on their investment in different forms of business
This study aimed to investigate the relationship between Working Capital Management and firms’ Profitability of listed companies in the Sri Lankan Consumer Staples Sector
Found a significant positive impact of Current Assets Ratio on Profitability. These results were obtained from the Fixed Effect model and after controlling the Firm Size and the Sales Growth
Summary
Investors all over the world invest their money in a business to get some return on their investment in different forms of business. In small and medium businesses like proprietorship and partnership owners have direct or indirect control over the management of the business They are responsible for all the profits and losses. In order to 104 | P a g e fulfil these expectations, managers should pay attention to maintain their daily operations smoothly This means they should keep eye on the concept of Working Capital Management. Working Capital Management is the method a company manages the relationship between assets and liabilities in the short term. Working Capital Management is an essential concept for every business organization to run its business efficiently. Financing decisions that are taken in the short-term, are the basis for the working capital management efficiency and it is necessary for maintaining a proper balance between liquidity and profitability of a firm. WCM is the day-to-day function of all management decisions that affect the size and effectiveness of the working capital (Kaur, 2010)
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