Key components of working capital management: Investment performance in Malaysia

Loo, Pui-Yan; Lau, Wei-Theng

doi:10.5267/j.msl.2019.7.010

Cited by 8 publications

(4 citation statements)

References 24 publications

(53 reference statements)

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“…Effective management of these components is essential for maintaining liquidity and profitability, which are the main objectives of working capital management (Palombini, 2012, Akgün, 2016, Kipronoh, 2018. Additionally, the cash conversion cycle, which involves the time it takes to convert inventory and receivables into cash and payables into cash payments, is a critical aspect of working capital management (Loo, 2019). The balance between liquidity and profitability is a key consideration in managing working capital components, as it directly impacts the overall value and success of the business [2][6] [8] .…”

Section: Literature Review Working Capital Managementmentioning

confidence: 99%

Effect of Working Capital Management on Profitability of Listed Consumer Good Companies in Nigeria

Ijuwo

2024

JARBMA

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This ex post facto study investigates the effect of Working Capital Management (WCM) on the profitability of 10 listed consumer goods companies in Nigeria over the period 2017-2022. Utilizing a panel data analysis framework with fixed and random effect regression, Jarque Bera statistics and Breusch-Pagan LM for assessing heteroscedasticity, the study reveals valuable insights into the relationship between WCM variables and Return on Assets (ROA). The positive and significant coefficient of 0.000617 for the Cash Conversion Cycle (CCC) suggests that a deliberate and strategic extension of the cash conversion cycle is associated with increased profitability. The study also explores the intricate relationships, revealing that fluctuations in inventory turnover, variations in accounts receivables and payables, and certain firm characteristics like size and leverage may not be robust determinants of profitability. These findings emphasize the need for tailored working capital management strategies based on specific industry characteristics and organizational contexts. The study's implications underscore the importance of meticulous cash conversion cycle management for consumer goods companies seeking to optimize financial health and operational effectiveness. While inventory turnover, accounts receivables, and accounts payables are crucial components of WCM, their individual variations may not be decisive factors influencing overall financial success. This research contributes to the growing body of evidence on the intricate relationship between WCM and profitability, offering valuable insights for financial decision-makers in the consumer goods sector in Nigeria.

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Section: Literature Review Working Capital Managementmentioning

confidence: 99%

Effect of Working Capital Management on Profitability of Listed Consumer Good Companies in Nigeria

Ijuwo

2024

JARBMA

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“…According to these writers, management decisions can be categorised into three groups: working capital management (WCM), capital budgeting, and capital structure (ibid). According to Loo and Lau (2019), Working Capital Management (WCM) refers to the immediate resources that a company needs to support its regular business operations. Effective working capital management (WCM) significantly contributes to achieving high financial performance (Siraj, Mubeen & Sarwa, 2019).…”

Section: Introductionmentioning

confidence: 99%

Effects of working capital management on the profitability of South African construction companies listed on the JSE

Sejake,

Beneke,

Maseko

et al. 2024

IJRBS

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This study examines the correlation between inventory and accounts payable management and the profitability of construction companies listed on the Johannesburg Stock Exchange (JSE). The annual financial statements of all 13 listed construction businesses from 2009 to 2019, including statements of financial position and financial performance, were obtained from an external database for statistical analysis. The study employed multiple linear regression to assess the impact of working capital management on the financial performance of construction companies listed on the JSE. Additionally, a correlation model was utilised to investigate any potential relationships among the variables being examined. The study's findings indicate that the management of working capital has a notable impact on the profitability of construction companies listed on the Johannesburg Stock Exchange (JSE) in South Africa. Despite contradicting findings from other studies that support the opposite conclusion, this study demonstrates that effective management of working capital does not necessarily lead to a positive relationship with financial performance for financial managers of construction companies. Therefore, it is crucial to consider other aspects of management in addition to working capital.

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“…On the other hand, shorter collection period may adversely affect firm sales as customers would not be able to verify product quality (Deloof and Jegers, 1996). A good receivable collection policy will always result in optimal collection period with increased sales and contribute in increased shareholder wealth (Jr & Hausman, 1970;Loo & Lau, 2019). Thus, firm managers must foresee average collection period as a strategic resource while extending trade credit to customers.…”

Section: Introductionmentioning

confidence: 99%

Determinants of Trade Credit Supply and Shareholders’ Return in Developed and Developing Countries

Bashir¹,

Regupathi²

2023

Int.J.Res.Publ.Rev.

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This study analyzed the relationship between firm-specific determinants and trade credit supply. Unlike past studies, average collection period is used as a proxy of trade credit supply. Further, impact of trade credit supply on shareholder return is examined in the study. This study compared the results among different income groups consisting of developing and developed countries (lower-middle income, upper-middle income, and high income). Data of six countries is collected from DataStream for the period 2002-2018. Kruskal Wallis test revealed that firms of lower-middle income developing countries collected receivables early as compared to other countries. Generalized method of moments (GMM) is applied to test the relationship between determinants and trade credit supply. The findings of the study showed that for all firms, average payment period, inventory conversion period and net profit margin of supplier significantly increase while cash flow volatility and leverage significantly decrease the trade credit supply. The relationships are similar across different group of countries except net profit margin. However, the impact of determinants on trade credit supply is different in different groups. In addition, an optimal period of trade credit supply is found. Longer average collection period beyond optimal period decreases shareholder returns. In each income group, optimal period of trade credit supply is different. These results have implications for managers across developed and developing countries to optimize trade credit supply policies.

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Key components of working capital management: Investment performance in Malaysia

Cited by 8 publications

References 24 publications

Effect of Working Capital Management on Profitability of Listed Consumer Good Companies in Nigeria

Effect of Working Capital Management on Profitability of Listed Consumer Good Companies in Nigeria

Effects of working capital management on the profitability of South African construction companies listed on the JSE

Determinants of Trade Credit Supply and Shareholders’ Return in Developed and Developing Countries

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