Working Capital Management as Crucial Tool for Corporate Performance in the Transport Sector: A Case Study of Slovakia and the Czech Republic

Abstract

Working capital management is one of the decisive factors in increasing business performance through the efficient use of current assets such as inventories, receivables, funds, and current liabilities. The primary aim is to identify how working capital management using a wide range of liquidity and activity indicators affects the corporate performance of transport companies broken down by company size into small, medium, large, and very large companies in Slovakia and the Czech Republic using multiple linear regression analysis with achieving competitive R-square as a relevant statistical metric compared to other models from previous research. Our research focuses on a different industry than the traditional production industry. Descriptive statistics show that more than half of the assets are impelled assets in the corporate finances of transport companies. We deal with the impact of working capital management on corporate performance, considering the corporate size. This output delivers specific findings for small, medium, large, and very large businesses separately. All multiple linear regression models for estimating corporate performance are proposed for transport companies in the Czech and Slovak Republics. The results show that liquidity has a negative impact, in contrast to activity indicators except for DPO, on corporate performance in Czech transport companies. On the other hand, Slovak small, medium, and large enterprises must effectively manage free cash and cash equivalents, too. However, activity indicators, except DRO for an aggregated group of large and very large enterprises, also harm business performance. These outputs are beneficial for business management and making relevant decisions to increase business performance, the models identify the strengths and weaknesses of working capital management. In general, this research helps to make specific decisions focused on receivables, inventory management, and cash management as part of working capital management.