Research articles on working capital management and profitability

Deferment of payments to suppliers can enable the firm to evaluate the product bought and may be a cheap and flexible funding source.

Impact of working capital management on profitability research paper

There are a number of studies covering the developed countries in the literature, while there are limited studies covering the emerging countries. Because sales on credit allow the customer to examine the product before paying, it may increase sales [ 9 ]. The firm that invests more in current assets is more liquid than a firm that does not invest. The style of WCM may have a considerable influence on the profitability, risk, and liquidity of the firm [ 12 ]. Firms need working capital to begin its business operations, carry on its activities efficiently, and meet its short run obligations [ 6 ]. Deferment of payments to suppliers can enable the firm to evaluate the product bought and may be a cheap and flexible funding source. Working capital management is concerned with the day-to-day activities rather than long-term investment decisions [ 7 ]. The financing problem is one of the most important problems faced by these firms. Some of these studies are summarized in Table 1. At this point, the industry sector plays a significant role. Because sales on credit allow the customer to examine the product before paying, it may increase sales [ 9 ]. In this context, firms that invest heavily in inventory and accounts receivables may be exposed to low profits [ 11 ]. On the other hand, high inventory levels and flexible credit sales policy can contribute to increased sales. Another component that has an impact on the working capital requirement is accounts payables.

It is anticipated that the study will contribute to the literature in terms of comparing the relationship between the WCM and profitability of industrial firms of emerging countries like Turkey.

These firms need to be able to use their existing resources effectively and be self-sufficient because of the scarcity of funding resources and the insufficient accumulation of capital.

Working capital management is concerned with the day-to-day activities rather than long-term investment decisions [ 7 ]. This study, which investigates the impact of the WCM on the profitability of Turkish industrial firms, is considered to contribute on the determination of working capital investment levels of these firms, determination of the distribution among the working capital components, effective use of scarce resources, and resource supply and sustainability of future investments by applying a working capital that will increase the profitability.

Excessive working capital like inadequate working capital has led many businesses to fail and prevent their growth [ 17 ]. The style of WCM may have a considerable influence on the profitability, risk, and liquidity of the firm [ 12 ]. A firm can collect its receivables in a short time and restrict credit sales to reduce account receivables and increase cash inflows.

Introduction Global economic integration for developing countries through economic liberalization and democratization is accepted as the best way to overcome destitution and discrimination [ 1 ]. In this case, the industry sector will remain important for the Turkish economy in the future.

However, rigid sales policies and low credit sales would lead to loss of sales, thus causing profits to fall [ 6 ]. For Turkey, which is among the emerging countries, the industry sector is important for the country economy in terms of value added export and employment [ 3 ].

Because sales on credit allow the customer to examine the product before paying, it may increase sales [ 9 ].

working capital management articles 2017

The style of WCM may have a considerable influence on the profitability, risk, and liquidity of the firm [ 12 ].

Effective WCM is a significant factor affecting the survival of the firm, the continuity of its activities, and the maintenance of liquidity and profitability [ 16 ].

Impact of working capital management on firms profitability pdf

However, the high inventory and loose trade credit policies lead to the locking of the money to the working capital [ 9 ]. There are a number of studies covering the developed countries in the literature, while there are limited studies covering the emerging countries. In this sense, working capital components WCC are cash, cash equivalents, inventories, accounts receivables, and accounts payables. In this context, firms that invest heavily in inventory and accounts receivables may be exposed to low profits [ 11 ]. For Turkey, which is among the emerging countries, the industry sector is important for the country economy in terms of value added export and employment [ 3 ]. However, rigid sales policies and low credit sales would lead to loss of sales, thus causing profits to fall [ 6 ]. This study, which investigates the impact of the WCM on the profitability of Turkish industrial firms, is considered to contribute on the determination of working capital investment levels of these firms, determination of the distribution among the working capital components, effective use of scarce resources, and resource supply and sustainability of future investments by applying a working capital that will increase the profitability. On the other hand, high inventory levels and flexible credit sales policy can contribute to increased sales. The findings obtained from these studies vary depending on the method and data set used. Working capital management is concerned with the day-to-day activities rather than long-term investment decisions [ 7 ]. There are some advantages to work with high inventory levels such as preventing customer losses caused by not having enough stock level and protecting against price volatilities [ 10 ]. The style of WCM may have a considerable influence on the profitability, risk, and liquidity of the firm [ 12 ]. There are a number of studies covering the developed countries in the literature, while there are limited studies covering the emerging countries.
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