Turnover In Days Research Articles

The Relationship between Working Capital Management and Profitability: Evidence from Pakistan

In this paper secondary data is used for analysis of working capital on profitability. In this research paper we take working capital as independent variable and net operating profit as dependent variable. We have found a significant negative relationship between net operating profitability and the average collection period, inventory turnover in days, average payment period and cash conversion cycle for a sample of Pakistani firms listed on Karachi stock exchange. Previous theoretical research predicts negative relationship between cash conversion cycle and corporate profitability. The results of regression indicate that the coefficient of account receivable is negative; that is, the increase or decrease in average collection period wills significantly affect the profitability of the firm. According to inter-item correlation matrix the relationship of account receivables, account payables and inventory with profit shows positive relationship but cash conversion cycle, financial debt and financial assets shows negative relationship with profitability. Inventory shows the positive relationship with dependent variable which proves that working capital management has a positive effect on firm’s probability.

The Effect of Working Capital Management on Profitability

The purpose of this study is to find out the effect of working capital management on company profitability. The study aims at examining the statistical significance between company’s working capital management and profitability. In light of this objective the study adopts quantitative approaches to test a series of research hypotheses. A sample of three (3) manufacturing companies listed on the Dar es Salaam Stock Exchange (DSE) is used for a period of ten years (2002-2012) with the total of 30 observations. Data is analyzed on quantitative basis using Pearson’s correlation and Regression analysis (Ordinary Least Square). The key findings from the study are; Firstly, there exists a positive relationship between cash conversion cycle and profitability of the firm. This means that as the cash conversion cycle increases it will lead to an increase in profitability of the firm, and managers can create a positive value for the shareholders by increasing the cash conversion cycle to a reasonable level; Secondly, there is a negative relationship between liquidity and profitability showing that as liquidity decreases, the profitability also increases; Thirdly, there exists a highly significant negative relationship between average collection period and profitability indicating that a decrease in the number of days a firm receives payment from sales affects the profitability of the firm positively; Fourthly, there is a highly significant positive relationship between average payment period and profitability. This implies that the longer a firm takes to pay its creditors, the more profitable it is.; and Fifthly, there exists a highly significant negative relationship between inventory turnover in days and profitability hinting that firms which maintain sufficiently low inventory levels reduce the cost of storing the inventory which results to higher profitability.

Working Capital Management and Corporate Performance: Evidence from Iranian Companies

The present research studies the effect of working capital management over the performance of firms Listed in Tehran Stock Exchange (TSE). Average Collection Period, Inventory Turnover in days, Average Payment Period, Cash Conversion Cycle, and Net Trading Cycle were used to assess working capital management, and Net Operating Profitability was used to assess firms’ performance. The findings of studying 50 different companies during the time period between 2006 and 2009 by using a multi- regression model showed that there is a negative and significant relationship between the variables of Average Collection Period, Inventory Turnover in day, Average Payment Period, Net Trading Cycle and the performance of firms Listed in Tehran Stock Exchange (TSE). There were no evidences to prove the existence of a significant relationship between Cash Conversion Cycle and the company's performances (NOP). The results showed that the increase in Collection Period, Payment Period, and Net Trading will lead towards the reduction of profitability in the company. In other words, managers can increase the profitability of their companies reasonably, by reducing Collection Period, Inventory Turnover, and Payment Period.

An Empirical Study of Association between Working Capital Management and Performance: Evidence from Tehran Stock Exchange

Present study is aimed at determining the effects of working capital management on the performance of firms. In this research, we have selected a sample of 112 Iranian firms listed on Tehran Stock Exchange for a period of 10 years from 2000–2009, we have studied the effect of different variables of working capital management including the Average collection period, Inventory turnover in days, Average payment period and Cash conversion cycle on the financial performance of Iranian firms. Debt ratio, Current ratio, size of the firm (measured in terms of natural logarithm of sales), financial assets to total assets ratio and Stock Exchange Index have been used as control variables, Correlation, and regression analysis (Pooled least square and general least square with cross section weight models) are used for analysis. The results show that there is a strong negative relationship between variables of the working capital management and profitability of the firm.

Relationship between Working Capital Management and Firm Profitability: Manufacturing Sector of Pakistan

The goal of the study is to measure the relationship between working capital management and firm profitability in the manufacturing sector of Pakistan. We have selected the sample of 100 Pakistani manufacturing listed companies on Karachi Stock Exchange for the time period of 10 year from 1999-2008. The data used in this study was acquired from Karachi Stock Exchange (K.S.E) and from the Balance Sheet Analysis of Joint Stock Companies by State Bank of Pakistan. We have studied the effect of different variables of working capital management including the Average collection period, Inventory turnover in days, Average payment period and cash conversion cycle. Current ratio, Size and debt ratio used as control variables. Pearson Correlation and Regression Analysis (Ordinary Least Square and Fixed Effect Model) are used.The results show that there is a strong negative relationship between variables of the working capital management and profitability of the firm. It means that as the cash conversion cycle increases it will lead to decreasing profitability of the firm, and managers can create a positive value for the shareholders by reducing the cash conversion cycle to a possible minimum level. We find that there is a significant negative relationship between liquidity and profitability. We also find that there is a positive relationship between size of the firm and its profitability. There is also a significant negative relationship between debt used by the firm and its profitability.The sample size consisting of 100 manufacturing companies is relatively small as compared to 650 companies listed on the Karachi Stock Exchange as on August 2009 which slightly limits the generalizability of the findings. To the best of the researcher’s knowledge this study is a unique study of its kind in the Non-Financial Sector that studies the impact of working capital management on firm profitability of manufacturing sector.

Working Capital Management and its Affect on firm’s Profitability and Liquidity : in other Food Sector of ( KSE ) Karachi Stock Exchange

This paper aims to extend the Rehman and Nasr finding regarding Working capital management and its affect on profitability and liquidity of Pakistani firms. For the purpose of our analyses we have been selected the other food sector and selected the data from 2006-2010 of 18 companies of this sector listed on Karachi Stock Exchange. For this purpose we examine the effect of different variables of working capital management like Average collection period, average payment period, inventory turnover in days, cash conversion cycle, debt ratio, financial asset to total asset ratio, current ratio and net operating profitability. We have used pooled least square regression and common effect model. We found that there is significant positive affect of working capital management on profitability and liquidity of the firms. Size of the firm and financial asset to total asset ratio have significant positive effect on firm’s profitability while average collection period has significant negative effect on firm’s profitability. Size of firm and cash conversion cycle has significant positive effect on firm’s liquidity.

Impact of working capital on firms’ profitability

The correlation between working capital and profitability of firms is analyzed for the management of cash cycle management. Working capital is made by the three important factors, debtor, creditor and stock. When we include cash conversion cycle (CCC) to working capital then it becomes working capital management (WCM). Two sectors are selected as a sample size: automobile and oil and gas sector. The time period is from 2004 - 2009. Different variables affecting the profitability of firms are selected. In this study, networking capital, inventory turnover in days, average account receivable and financial asset to total assets (FATA) are taken as independent variables. The result shows positive movement of working capital (WC) on firm’s profitability. R shows the fitness of the model which is 49.95 %. The independent variables explain 49.95% of the model. Key words: Working capital management (WCM), cash conversion cycle (CCC), account receivable (AR).