The relationship between working capital management and profitability of the companies (Case study: Listed companies on TSE) (Article) (3)

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International Research Journal of Finance and Economics

Volume 76, November 2011, Pages 158-166

The relationship between working capital management and profitability of the companies (Case study: Listed companies on TSE) (Article)

Mojtahedzadeh, V., Tabari, S.H.A., Mosayebi, R.

Al-Zahra University, Tehran, Iran

View references (22)

Abstract

The purpose of this research is to study the relationship between working capital management and corporate profitability. The statistical population includes the listed companies on Tehran Stock Exchange (TSE) and a sample of 101 firms during the period of 2004-2008. Multivariate regression and Pearson correlation are used to test hypotheses. Findings show a negative significant relationship exists between cash conversion cycle, Number of Days of A/P, Number of Days of A/R and corporate profitability. Although, the relationship between the average period of Inventory retention and profitability was not significant, but confirmation of the three other subsidiary hypotheses which are independent of each other showed the existence of a significant relationship between corporate profitability and working capital management. Because, cash conversion cycle has been viewed as the key measure of working capital management (Mussawi, Laplaute and Kieschnick, 2006), the relationship between working capital management and corporate profitability was confirmed. Findings also show that a positive significant relationship exists between logarithm of sales and profitability, and a negative significant relationship exists between Financial Debt Ratio and profitability. Furthermore industry categories affect profitability. © EuroJournals Publishing, Inc. 2011.

Author keywords

A/P; A/R; Cash conversion cycle; Cash flow management; Period of inventory retention

ISSN: 14502887Source Type: Journal Original language: English

Document Type: Article

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Mojtahedzadeh, V.; Al-Zahra University, Tehran, Iran; email:vida.mojtahed
© Copyright 2011 Elsevier B.V., All rights reserved.

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