Relationship between Efficiency Level of Working Capital Management and Profitability of Firms in the Textile Sector of Pakistan. This paper is first attempt to study the working capital management and profitability relationship in UAE's Real Estate and Construction. Effects of working capital management on a firm's profitability. .. available to me , there are no studies done on the relation between working capital.
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The Journal of Accounting and Management, Vol 2, No 3 (2012)
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A study on relationship between working capital and profitability » Growing Science
Technological and Economic Development of Economy,12 3 However, the high inventory and loose trade credit policies lead to the locking of the money to the working capital [ 9 ]. In this context, firms that invest heavily in inventory and accounts receivables may be exposed to low profits [ 11 ]. Another component that has an impact on the working capital requirement is accounts payables.
Deferment of payments to suppliers can enable the firm to evaluate the product bought and may be a cheap and flexible funding source. But, postponing payments can be expensive, if the firm has got a discount for early payment [ 9 ]. The style of WCM may have a considerable influence on the profitability, risk, and liquidity of the firm [ 12 ].Working Capital Management explained.
The firm that invests more in current assets is more liquid than a firm that does not invest. While lower investment in the working capital expressed as aggressive working capital policy is associated with higher returns and higher risk, more investment in the working capital expressed as conservative working capital policy is associated with lower return and lower risk [ 14 ]. The firm has to choose between aggressive and conservative working capital policies depending on its purpose [ 15 ].
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 ]. Excessive working capital like inadequate working capital has led many businesses to fail and prevent their growth [ 17 ]. The empirical results will help to gain knowledge by handling capital structure that is not straightforward and is dependent on working capital and its management.
Additionally, this study will explore how integrated and non-integrated listed companies strategize themselves when it comes to utilizing WCM and capital structure to improve profitability.
Practically, this study contributes to provide better understanding to the managers and enable them to apply WCM strategies and make sure the firm is able to meet the stakeholder requirements References Abor, J. The effect of capital structure on profitability: The journal of risk finance, 6 5 Management Accounting for Hospitality and Tourism. International Journal of Contemporary Hospitality Management, 13 3 Perceived relationship between corporate capital structure and firm value in Nigeria.
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