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Working capital management is critical to an organization's financial health and long-term performance. The relationship between working capital management and firm performance is uncertain, and research on firm size's moderating effect is scarce. The study investigates the impact of Working capital management (WCM) on firm performance and examines...
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... Test is used since it is the most widely used test for estimating the normality of the dataset. Table 4 shows the Shapiro-Wilk normality test for the variables. The P-value for all the variables above is indicated to be 0.00, which shows significance at 5%; hence it rejects the null hypothesis that the data is normally distributed. ...Similar publications
This research examines the impact of implementing effective corporate governance practices on the financial performance of banking firms publicly traded on the Indonesia Stock Exchange (IDX). The study focuses on banking businesses listed on the Indonesia Stock Exchange, including the population for analysis. A purposive sampling method was employe...
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... The 2018 crisis brought about a sudden credit crunch, restricting working capital for the businesses due to their risk aversion (Almeida & Campello, 2007) while the pandemic caused supply chain disruptions, demand shocks, and operational shutdowns which emphasized the need for inventory agility and operational resilience (Baldwin & Weder di Mauro, 2020). To this end, Companies must employ situational working capital management strategies, tailoring these strategies to the problem faced at that time to optimize their financial performance (Ahmad, 2022;Iqbal ,2023;Jabbouri, 2022). ...
This study investigates the impact of working capital management (WCM) on the profitability of consumer goods companies in Nigeria. Using a quantitative research design, panel data from five selected companies over a five-year period (2019–2023) were analyzed. Key working capital metrics, including Accounts Receivable Period (ARP), Accounts Payable Period (APP), and Inventory Turnover, were examined alongside profitability measured by Return on Assets (ROA). A Fixed Effects regression model was employed to evaluate the relationship between WCM components and profitability, while diagnostic tests ensured the robustness of the results. Findings reveal that ARP and APP have statistically insignificant impacts on ROA, suggesting that receivables and payables management practices may not significantly influence profitability. Similarly, Inventory Turnover showed no robust relationship with profitability, highlighting the complexity of WCM in driving financial performance. Control variables such as firm size and leverage were marginally significant, suggesting their potential role in profitability. The study concludes that while effective WCM practices are essential for operational efficiency, their impact on profitability may depend on firm-specific and industry-specific factors. Recommendations include optimizing inventory management, streamlining receivables and payables cycles, and tailoring WCM strategies to the unique challenges of Nigeria’s consumer goods sector.
... Working capital management plays a crucial role in determining a firm's financial health and long-term performance (Iqbal, 2023). Efficient working capital management is essential for maintaining financial stability and profitability, as it significantly and positively influences firm performance (Iqbal, 2023). ...
... Working capital management plays a crucial role in determining a firm's financial health and long-term performance (Iqbal, 2023). Efficient working capital management is essential for maintaining financial stability and profitability, as it significantly and positively influences firm performance (Iqbal, 2023). However, the relationship between working capital management and firm performance is complex and varies depending on factors such as firm size and financial constraints (Altaf, 2017, Jabbouri, 2022. ...
... Moreover, the impact of working capital management on firm performance may differ during economic crises, as evidenced by the contrasting effects observed during the COVID-19 pandemic compared to the financial crisis of 2008 (Ahmad, 2022). Overall, the evidence underscores the importance of tailored working capital management strategies for firms of all sizes to optimize their financial performance (Iqbal, 2023, Jabbouri, 2022and Ahmad, 2022. ...
This ex post facto study investigates the effect of Working Capital Management (WCM) on the profitability of 10 listed consumer goods companies in Nigeria over the period 2017-2022. Utilizing a panel data analysis framework with fixed and random effect regression, Jarque Bera statistics and Breusch-Pagan LM for assessing heteroscedasticity, the study reveals valuable insights into the relationship between WCM variables and Return on Assets (ROA). The positive and significant coefficient of 0.000617 for the Cash Conversion Cycle (CCC) suggests that a deliberate and strategic extension of the cash conversion cycle is associated with increased profitability. The study also explores the intricate relationships, revealing that fluctuations in inventory turnover, variations in accounts receivables and payables, and certain firm characteristics like size and leverage may not be robust determinants of profitability. These findings emphasize the need for tailored working capital management strategies based on specific industry characteristics and organizational contexts. The study's implications underscore the importance of meticulous cash conversion cycle management for consumer goods companies seeking to optimize financial health and operational effectiveness. While inventory turnover, accounts receivables, and accounts payables are crucial components of WCM, their individual variations may not be decisive factors influencing overall financial success. This research contributes to the growing body of evidence on the intricate relationship between WCM and profitability, offering valuable insights for financial decision-makers in the consumer goods sector in Nigeria.
... Furthermore, several research studies have also been carried out in the context of the Pakistani economy. Iqbal et al. (2023) examined the companies listed on KMI-30 index at Pakistan stock exchange during 2012-2022 and found a significant positive association between profitability and CCC. They suggest that companies should optimize their inventory level as well as accounts payables and receivables while maintaining adequate liquidity to fulfill the firms' operating needs. ...
Working capital management is a crucial instrument and one of the key aspects of any business management. It is considered as an accounting technique to maintain the organization's liquidity and financial balance and is regarded as a critical part of financial management in the company. This study emphasizes on investigating the role played by working capital management in enhancing the profitability of companies from the manufacturing sector listed in Pakistan stock exchange during the period 2018-2022. Return on equity and return on assets are used as the profitability measures; however, account receivable turnover, inventory turnover and cash conversion cycle are used as the measures of working capital management. To evaluate the results, the least square regression model is used. The results show that inventory turnover has a significant positive association with both ROA and ROE, which implies that inventory management and sales acceleration have a positive effect on the company's return on assets and return on equity. Similarly, the association of accounts receivable turnover with ROA and ROE is also significant and positive, demonstrating that good credit management and prompt receivables collection improve the return on equity and assets. The research also reveals a significant positive association of both ROA and ROE with the cash conversion cycle. Higher returns on assets and equity are connected with a higher cash conversion cycle. The results suggested that the managers should speed up the collection of receivables as quickly as possible and quickly sell the inventory so that the cash thus generated can be reinvested in productive assets, which can increase the company’s profitability. The study's findings provide an important guideline to financial managers in managing the appropriate level of working capital to enhance firms’ profitability.
