Abstract
Working capital management can be considered as vital issue in financial decision-making processes in company. Consequently, it directly affects company’s success in the way of its profitability. Empirical evidence is provided on a sample of Croatian and Slovenian companies in the dairy processing industry. Univariate and multivariate analyses are used to test hypotheses about impact of working capital management components and cash conversion cycle on company’s profitability. Furthermore, differences in working capital management policies in condition of crisis and before crisis are examined. Our findings show that none of working capital management components significant affect profitability, measured by return on assets, while statistically significant relation exists between cash conversion cycle as working capital management comprehensive measure and profitability
Highlights
The dairy processing industry together with dairy farming, dairy traders, retail and customers creates dairy supply chains (Muminović and Aljinović Barać, 2015)
This paper provided insights into working capital management elements and its impact company’s success approximated with return on assets profitability ratio on the sample of Croatian and Slovenian companies in the dairy processing industry
Traditional working capital theory suggest that effective use of short-term assets and liabilities will lead to increased profitability, because effective working capital management shortens the time capital is tied up in the business process and reduces all related costs
Summary
The dairy processing industry together with dairy farming, dairy traders, retail and customers creates dairy supply chains (Muminović and Aljinović Barać, 2015). According to Muminović and Pavlović (2012) and Aljinović Barać and Muminović (2013), the dairy processing industry in Slovenia and Croatia are characterized by a few large companies (with dominant position and market share), accompanied by many small processors that often produce for niche markets. Slovenian and Croatian dairies have been analyzed together as example of two neighbouring countries with a common history before 1991. Their demand and supply markets are assumed to have broadly the same preferences and these two countries are tightly related with trade in goods as well as daily labour migrations.
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