An Investigation of the Association between Working Capital Management and Corporate Performance
محورهای موضوعی : General Management
Vahid Taghizadeh Khanqah
1
(Department of Accounting, Tabriz branch, Islamic Azad University (IAU), Tabriz, Iran.)
Mohsen Akbari Khosroshahi
2
(Department of Accounting, Tabriz branch, Islamic Azad University (IAU), Tabriz, Iran.)
Mohammad Reza Ebrati
3
(Department of Accounting, Tabriz branch, Islamic Azad University (IAU), Tabriz, Iran.)
کلید واژه: working capital management, Net operating profitability, average collection period, Inventory turnover in days, Average payment period,
چکیده مقاله :
Working capital management is an essential part of the short-term finance of a firm. With anefficient working capital management, a firm can release capital for more strategic objectives, reduce thefinancial costs, and improve profitability. The present research studies the relationship of working capitalmanagement on 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 usedto assess working capital management, and Net Operating Profitability was used to assess firms performance.The findings of studying 50 firms during the period between 2006 and 2009 by using an Ordinary Least SquareMethod (OLS) showed that there would be a negative and significant relationship between the variables ofAverage Collection Period, Inventory Turnover in day, Average Payment Period, Net Trading Cycle and theperformance of firms Listed in Tehran Stock Exchange (TSE). There were no evidences to prove the existence ofa significant relationship between Cash Conversion Cycle and the firms performance (NOP) for all years from2006 to 2009. The results showed that the increase in Collection Period, Payment Period, and Net Trading willlead towards the reduction of profitability in the firm. In other words, managers can increase the profitability oftheir firms reasonably, by reducing Collection Period, Inventory Turnover, and Payment Period.
