Abstract
This study is aimed at explaining relationship between working capital management and profitability with Vietnam empirical evidence. We selected a sample of 34 construction companies listed in the Vietnam stock exchange for the period of 2007 -2015. We found statistically significant negative relationship between the cash conversion cycle with profitability and also found statistically significant positive relationship between the debt ratio and the fixed financial assets ratio with construction companies’ profitability. The results have the special meaning to construction companies in which Vietnamese construction companies doing business in the Vietnamese economy have their own characteristics.
Highlights
Working Capital includes the whole current assets owned by a firm
We studied the relationship between gross operating profit (GOP) and working capital management through four models as below: Model (1)
We indicate the empirical results about the relationship between working capital management and profitability of the Vietnam construction companies
Summary
Working Capital includes the whole current assets owned by a firm. Suitable finance strategy can bring efforts for firm, finance director implements to carry the balance between current assets not at optimal level and responsibilities to an optimal level (Lamberson, 1995). To raise the market value, firms need to build the efficient capital management strategy (Howorth & Westhead, 2003; Deloof, 2003; Afza & Nazir, 2007). Firms with the competent financial directors in managing receivables, inventories and liabilities can be successful and bring business efficiency (Filbeck & Krueger, 2005). The optimum working capital level is the case in which balance between risk and efficiency is provided. Working capital management has its effect on liquidity as well on profitability of this firm (Raheman, 2007)
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