M.H. Setayesh; M. Kazemnejad; M. zolfaghari
Volume 6, Issue 23 , October 2008, , Pages 43-65
Abstract
This study investigates the effects of working capital management on the profitability of the firms listed in Tehran Stock Exchange. Withthis regard, variables such as receivables collection period, inventory conversion period, accounts payable payment period, and cash conversion ...
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This study investigates the effects of working capital management on the profitability of the firms listed in Tehran Stock Exchange. Withthis regard, variables such as receivables collection period, inventory conversion period, accounts payable payment period, and cash conversion cycle are used for the measurement of working capital management, and Return on Assets (ROA) is used for the measurement of profitability of the firms. Moreover, Sales growth, Leverage, and Size are used as control variables. Using multiple regression and considering the results of investigations of 224 firms in the period from 1382 to 1386, we find that there is a negative significant correlation between receivables collection period, Inventory conversion period, and cash conversion cycle with the profitability of firms listed in Tehran Stock Exchange. No evidence confirming significant correlation between accounts payable payment period and profitability is found. Considering this, the negative significant correlation between profitability and Cash conversion cycle measuring the joint effects of receivables collection period, Inventory conversion period and Accounts payable payment period indicates that firms can increase their profitability and create value for their stockholders by appropriate management of working capital and decreasing Cash conversion cycle logically.
