Ponte Academic Journal May 2019, Volume 75, Issue 5 |
MEASURING THE IMPACT OF WORKING CAPITAL MANAGEMENT ON MANUFACTURING FIRMS PROFITABILITY Author(s): Manjula Pattnaik J. Ponte - May 2019 - Volume 75 - Issue 5 doi: 10.21506/j.ponte.2019.5.2 Abstract: Working capital management is an important aspect of financial management. Working capital refers to that part of the firm�s capital which is required for financing short term or current assets such as cash, marketable securities, debtors and inventories. It is also known as revolving or circulating capital. Working capital functions in the business as the heart functions in human body. Just like the heart circulates blood in the body, similarly, in working capital, funds are generated and then circulated in the business. When this circulation does not function, the business will be lifeless. Thus, prudent management of working capital is necessary for the success of a business. The main objective of this study was to examine and evaluate the impact of working capital management on profitability of selected manufacturing firms. The quantitative data from financial statements covering a period of 2012-2017 were collected for ten sole proprietorship manufacturing firms which have been selected by purposive sampling method. The research design was explanatory research and profitability was measured in terms of net operating profit (NOP). The study used descriptive statistics, and balanced fixed effect panel regression to analyze the data. The final findings of the study showed that average payment period has significant positive relationship with profitability while sales growth and size of the firm influence significantly in opposite direction on firms profitability.\r\nKeywords: Manufacturing firm, working capital management, liquidity, profitability.
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