The present study is a critical analysis of Net Working Capital (NWC) management in a framework with the different categories of SMEs with respect to its impact on profitability, particularly on Net Profit and ROA. The research goes on to investigate how NWC influences the financial performance indicators in small and medium enterprises (SMEs), knowing that efficient management of working capital is the key to business sustainability and growth. The paper will show some nuanced insights into how working capital practices affect the bottom line and asset utilization efficiency ROA. By the comprehensive analytic approach, this research is meant to integrate methodologies previously applied both in Georgian and international contexts to outline a nuanced understanding of the dynamics in question. It will analyze NWC's ratio to total assets and the positive relationship with ROA, along with the relationship between NWC and Net Profit, thus presenting a complete picture of the financial health and operational efficiency of SMEs. The research is expected to bear deep insight into the management of working capital, indicating how strategic financial planning plays a crucial role in enhancing the profitability of the company and asset utilization. These tailor-made recommendations will be a guiding light for the SME stakeholders in their endeavor to optimize their working capital practices as part of their aspiration to bolster financial outcomes. Augmenting knowledge already in circulation, this study becomes an implementable roadmap to practical financial decision-making, especially in the context of the myriad of SME sectors. The modified abstract captures the adapted research focus, showing the significance of NWC management in driving profitability and efficient asset utilization across SMEs. It sets grounds for a thorough analysis of the role of working capital in providing health and efficiency within finances and operations, giving valuable information and guidelines for small and medium businesses in the sphere of planning and managing strategic financials.
Read full abstract