Toward A Theory Of Working Capital

Walker, Ernest W.

doi:10.1080/00137916408928691

Cited by 23 publications

(12 citation statements)

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“…Sagan (1955) is one of the first proponents of importance of working capital in finance literature and emphasized on the need of managing working capital as it vitally affects the health of a firm. The baton was taken further by early works of Walker (1964) and Weston and Brigham (1972) who propounded and tested three propositions relating to effects of working capital on a firm’s risk. Van Horne (1969) developed a framework for taking working capital decisions by assigning probabilities.…”

Section: Conceptual Framework and Literature Reviewmentioning

confidence: 99%

Working Capital Management and Firm Performance in Emerging Economies: Evidence from India

Bhatia

Srivastava

2016

Management and Labour Studies

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This article aims to investigate the relationship between working capital management and firm performance in an emerging market. The analysis is done over a long window spanning across 2000–2014 by using ordinary least square (OLS), fixed- and random-effects model and generalized method of moments (GMM) on 2,327 firm-year observations, a panel data of 179 companies listed on the S&P BSE 500 Index of Bombay Stock Exchange (BSE). For robustness, in addition to accounting performance, market-based performance measure has also been employed to measure firm performance. This study based on India finds a negative relationship between the working capital management and firm performance, necessitating the need to efficiently manage the working capital for enhanced profitability.

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Section: Conceptual Framework and Literature Reviewmentioning

confidence: 99%

Working Capital Management and Firm Performance in Emerging Economies: Evidence from India

Bhatia

Srivastava

2016

Management and Labour Studies

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“…Moreover, current liabilities should be used in place of long-term debt whenever their use would lower the average cost of capital to the firm. Additional propositions of this sort concerning working capital and risk also were suggested by Walker [13] in an earlier paper dealing with a theory of working capital. While correct in principle, such aggregate guidelines and propositions probably offer little practical help.…”

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confidence: 93%

State of the Art of Working Capital Management

Smith¹

1973

Financial Management

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JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.. Wiley and Financial Management Association International are collaborating with JSTOR to digitize, preserve and extend access to Financial Management. He is the author of Portfolio Management and a number of articles in the areas of corporate finance and investments. W hile major theoretical advanceshave been made in recent years with respect to the longer-range financial decisions of the firm, research devoted to shorter-range or working capital decision-making would appear to have been less productive. At the same time, we can probably attribute a large number of business failures in recent years to an inability of financial managers to plan and control properly the current assets and current liabilities of their respective firms. Current assets collectively represent the single largest investment for many firms, while current liabilities account for a major part of total financing in many instances. Toward the end of refocusing the attention of financial theorists and academic researchers on the "top half" of the balance sheet, this paper summarizes eight somewhat distinct approaches to working capital management. The first three, aggregate guidelines, constraint set, and cost balancing, are partial models; the next two approaches, probability models and portfolio theory, stress future uncertainty and interdependencies; while the last three approaches, mathematical programming, multiple goals, and financial simulation, have a broader, systematic focus. The eight approaches should be considered as representative of the existing literature rather than as an exhaustive survey. The paper also synthesizes the important features of these existing approaches.

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“…The major contributions can be divided into nine distinct groups [14]. The first three — aggregate guidelines, constraint set, and cost balancing [17, 18] — involve partial equilibrium models; the next two — probability models and portfolio theory [1, 6] —stress future uncertainty and historical interdependencies; while the last four groups — mathematical programming, multiple goals, financial simulation, and econometric modeling [7, 8, 9, 10, 19, 21] — provide a broader, more integrated perspective.…”

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confidence: 99%

The Strategic Determinants of Working Capital: A Product‐line Perspective

Nunn

1981

J of Financial Research

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Toward A Theory Of Working Capital

Cited by 23 publications

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Working Capital Management and Firm Performance in Emerging Economies: Evidence from India

Working Capital Management and Firm Performance in Emerging Economies: Evidence from India

State of the Art of Working Capital Management

The Strategic Determinants of Working Capital: A Product‐line Perspective

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