|Type of paper:||Literature review|
|Categories:||Finance Financial management|
Article 1: Working Capital Management of Manufacturing Companies in Ghana
Abstract: The study focuses on profitability caused by the effect of working capital of organizations listed on the Ghana Stock Exchange. The findings of the study were that significant components of working capital including account payable, inventory days and cash conversion cycle affect manufacturing companies' profitability.
Introduction: This part introduces the concept of Working Capital Management and how it has been used in the past and evolved into the present by both large and small companies. Right working capital policies have an effect of increasing the value of a firm, and it requires the maintenance of a balance between profitability and liquidity of a company in everyday activities. The lack of monitoring daily actions can lead to difficulties with creditors (Ebenezer & Asiedu, 2013).
Literature Review: This section covers on the scholarly articles that have covered on working capital management and the management of working capital components. The critical elements covered include inventory management, account receivables, cash, and account payable. There is also literature appreciation of the effect of working capital management on the performance of organizations. Finally, the theories connecting working capital management and the firm's profitability is also assessed.
Research Methodology: A correlative design was used for the investigation of the impact of working capital management on the performance of producing firms through panel data. There was the use of information on the financial report.
Discussion: The regression model was used in an analysis, and it showed a negative relationship between net operating profit and account payable. These coefficients did not have any statistical impacts on the profitability of an organization.
Conclusion: Managers of production firms have to use effective and efficient practices of working capital management to ensure business survivability.
Article 2: The Relationship between Working Capital Management and Profitability: Case Study of Vietnam
Abstract: The failure or success of a company is influenced by working capital management. This study is derived from secondary data gathered from named organizations in the Vietnam stock market during the 2006-2008 period. The research aimed at the investigation of the connection between cash conversion cycle, profitability and its components in the stock market of Vietnam. The results of the study show a strong correlation between cash conversion cycle and profitability which is measured regarding gross operating profit.
Introduction: The author begins appraising assets in commercial business setups such as current and fixed assets. The argument by the author is that the intention of a company to invest in these assets is a reflection of its capital. The importance of working capital management is for assessing the current assets and liabilities in a firm to a satisfactory level. Working capital management influences the risk, profitability, and value of an organization. Effective management of working capital is crucial for the organizational strategy for the creation of shareholder value (Dong & Su, 2010).
Literature Review: This section provides an appraisal of past and current scholarly articles and literature on the relationship between the profitability of an organization and working capital management. Shin and Soenen (1998), Deloof (2003), Singh and Pandey (2008) all tried to explain the relationship between profitability and management of working capital.
Methodology: Secondary data was obtained from companies listed in the stock market of Vietnam and information on their financials.
Conclusion: There was a secure connection between organizational profitability and the working capital management measures such as accounts receivable, cash conversion cycle and the number of days inventory.
Article 3: The Relationship between working capital management and profitability of listed companies in the Athens Stock Exchange
Abstract: This article investigates the relationship between working capital management and corporate profitability through the 131 sample companies In the Athens Stock Exchange (ASE) in the fiscal period 2001-2004. The goal of this paper is to ascertain a statistically significant relationship between cash conversion cycle, profitability, and components of listed organizations.
Introduction: The profitability of an organization is measured by the structure of capital and the management of working capital. The components of working capital management have been analyzed, and information from different scholars has been used to express an opinion on how the activity has changed over time (Lazaridis & Tryfonidis, 2006).
Methodology: Data was collected from listed organizations in the Athens Stock Exchange Market, which was selected because of its financial statements' reliability. The research omitted some companies' because of the nature of their activities. The relevant variable is the cash conversion cycle which is used in measuring profitability. A regression analysis was used in assessing cost-effectiveness in organizations.
Conclusion: The paper adds more information to the literature such as Shin and Soenen (1998) who established a healthy relationship between corporate profitability and cash conversion cycle for listed American organizations. The profitability of operations affects the manner in which owners or managers act in the management of a firm's working capital. A lower gross operating profit is connected with increment in the number of accountable payable days. Less profitable organizations wait for more extended periods for payment of their bills, and they take advantage of the credit period issue by their suppliers.
Dong, H., & Su, J. T. (2010). The relationship between working capital management and profitability: a Vietnam case.
Ebenezer, A. B., & Asiedu, M. K. (2013). The Relationship Between Working Capital Management and Profitablity of Listed Manufacturing Companies in Ghana. International Journal of Business and Social Research, 3(2), 25-34.
Lazaridis, I., & Tryfonidis, D. (2006). Relationship between working capital management and profitability of listed companies in the Athens stock exchange.
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