Relationship Between Working Capital Management and Profitability of Listed Companies in the Athens Stock Exchange Ioannis Lazaridis

University of Macedonia - Accounting and Finance Dimitrios Tryfonidis University of Macedonia - Accounting and Finance Journal of Financial Management and Analysis, Vol. 19, No. 1, January-June 2006 In this paper we investigate the relationship of corporate profitability and working capital management. We used a sample of 131 companies listed in the Athens Stock Exchange (ASE) for the period of 2001-2004. The purpose of this paper is to establish a relationship that is statistically significant between profitability, the cash conversion cycle and its components for listed firms in the ASE. The results of our research showed that there is statistical significance between profitability, measured through gross operating profit, and the cash conversion cycle. Moreover managers can create profits for their companies by handling correctly the cash conversion cycle and keeping each different component (accounts receivables, accounts payables, inventory) to an optimum level. Effects of Working Capital Management on SME Profitability Pedro Martnez-Solano University of Murcia Pedro J. Garca-Teruel University of Murcia April 2006 The objective of the research presented here is to provide empirical evidence about the effects of working capital management on the profitability of a sample of small and medium-sized Spanish firms. With this in mind, we collected a panel of 8,872 SMEs covering the period 1996-2002. The results, which are robust to the presence of endogeneity, demonstrate that managers can create value by reducing their firm's number of days accounts receivable and inventories. Equally, shortening the cash conversion cycle also improves the firm's profitability. A Liquidity-Profitability Trade-Off Model for Working Capital Management Mihir Dash Alliance Business School May 10, 2009

This paper proposes a goal programming model for working capital management. Goal programming is necessary to model the working capital decision, as a balance has to be achieved between the conflicting objectives of liquidity and profitability. The model determines, for given working capital turnover and fixed assets turnover ratios, how funds should be maintained between working capital/current assets and fixed assets to achieve targeted levels of liquidity and profitability, whilst minimizing the opportunity cost/loss of excess liquidity. Net Working Capital Management Strategies as Factor Shaping Small Firm Value Grzegorz Michalski Wroclaw University of Economics Oficyna Wydawnicza Szkoly Glownej Handlowej w Warszawie, 2005 Actually determining the intrinsic value of liquidity is one of the unsolved problems in finance. Firms hold liquidity for a variety of different reasons. Generally, liquidity balances held in a firm can be called considered, precautionary, speculative, transactional and intentional. The first are the result of management anxieties. Managers fear the negative part of the risk and hold liquidity to hedge against it. Second, liquidity balances are held to use chances that are created by the positive part of the risk equation. Next, liquidity balances are the result of the operating needs of the firm. Having information about value of liquidity we can better dissolve the problem of liquidity management. The net working capital management leaning on the information about the intrinsic value of liquidity drives to increase of the value of the firm. The theses of article show how firm should manage net working capital to maximise value of the firm. Working Capital Management and Firm's Profitability: An Optimal Cash Conversion Cycle Haitham Nobanee Abu Dhabi University September 10, 2009 The traditional link between the cash conversion cycle and the firm's profitability is that shortening the cash conversion cycle increases firm's profitability. On the other hand shortening the cash conversion cycle could harm the firms operations and reduces profitability. However, identifying optimal levels of inventory, receivables, and payables where total holding and opportunities cost are minimized and recalculating the cash conversion cycle according to these optimal points provides more complete and accurate insights into the efficiency of working capital management. In this regard, we suggest an optimal cash conversion cycle as more accurate and comprehensive measure of working capital management.

Working Capital Performance of Corporate India: An Empirical Survey for the Year 2000-2001 Manoj Anand Indian Institute of Management Lucknow Chandra Prakash Gupta Management and Accounting research, January - June 2002 The present study is in continuation of our earlier attempt of developing quantitative benchmarks at the firm as well as at the industry level to evaluate Working Capital Management Performance of Corporate India from time to time. The previous attempt was based on the methodology designed by CFO Europe Magazine and REL Consultancy Group in their first Working Capital Survey of 1997. This time we experimented with a number of new parameters and different weights in the overall score to have better picture of working capital management performance of Corporate India. Finally, we selected three financial parameters for this purpose - CCE, DOC and DWC. The present study provides their estimates by using data of 427 companies over the period 1998-99 to 2000-01 for each company and for each industry. It is believed that the presence of these three in the overall working capital performance criterion not only helps in performance evaluation but also will capture the dynamics of risk-return trade off. Working Capital Management, Operating Cash Flow and Corporate Performance Haitham Nobanee Abu Dhabi University Maryam Al Hajjar The Hashemite University September 10, 2009 This paper investigates the relationship between working capital management, corporate performance and operating cash flow. The relationship is examined using dynamic panel data analysis. The analysis based on a sample of 5802 U.S. non-financial firms listed in the New York Stock Exchange, American Stock Exchange, NASDAQ Stock Market and the Over The Counter Market for the period 1990-2004 (87030 firm-year observations). The results suggest that managers can increase profitability and operating cash flow of their firms by shortening the cash conversion cycle, and by shortening the receivable collection period. The results also suggest that shortening the inventory conversion period and lengthening the payable deferral period reducing profitability and operating cash flow of firms instead of increasing them.

Applying Relative Solvency to Working Capital Management - The Break-Even Approach Enyi Patrick Enyi Babcock University June 15, 2005 This paper looks at working capital management from the perspective of net-investment, having observed that present approaches do not take the question of operational size and relative liquidity of the firm into account when dealing with the issue of working capital adequacy. To aid analysis, the research studied financial reports of 25 selected listed companies together with opinion surveys on (existing) practical applications on working capital management in some of them. The results from data analysis were validated using a students 't' distribution test. The findings revealed that firms that considered relative liquidity performs better and have better growth prospect than others, while the study recommends the use of relative liquidity (relative solvency) for a more accurate estimation of working capital adequacy by organizations. A Note on Working Capital Management and Corporate Profitability of Japanese Firms Haitham Nobanee Abu Dhabi University Maryam Al Hajjar The Hashemite University July 13, 2009 The primary aim of this paper is to investigate the relationship between working capital management and firm profitability. The analysis based on a sample of 2123 Japanese non-financial firms listed in the Tokyo Stock Exchange for the period 1990-2004. The results suggest that managers can increase profitability of their firms by shortening the cash conversion cycle, the receivable collection period and the inventory conversion period. The results suggest that managers can also increase the profitability of their firms by lengthening the payable deferral period. However, managers should be careful when lengthening the payable deferral period because this could damage the firms credit reputation and harm its profitability in the long run. Liquidity or Profitability: Financial Effectivness of Investments in Working Capital Grzegorz Michalski Wroclaw University of Economics

INTERNATIONAL FINANCIAL SYSTEMS, P. Cervinek, ed., BRNO, 2008 The basic financial purpose of corporation is creation of its value. Liquidity management should also contribute to realization of this fundamental aim. Many of the current asset management models that are found in financial management literature assume book profit maximization as the basic financial purpose. These book profit-based models could be lacking in what relates to another aim (i.e., maximization of enterprise value). The corporate value maximization strategy is executed with a focus on risk and uncertainty. This article presents the discussion about relations between firm's net working investment policy and firms value. Net Working Capital Management Strategies as Factor Shaping Firm Value Grzegorz Michalski Wroclaw University of Economics PROBLEMY ROZOWJU RYNKU FINANSOWEGO W ASPEKCIE WZROSTU GOSPODARCZEGO, pp. 564-570, UMCS Lublin, 2007 Actually determining the intrinsic value of liquidity is one of the unsolved problems in finance. Firms hold liquidity for a variety of different reasons. Generally, liquidity balances held in a firm can be called considered, precautionary, speculative, transactional and intentional. The first are the result of management anxieties. Managers fear the negative part of the risk and hold liquidity to hedge against it. Second, liquidity balances are held to use chances that are created by the positive part of the risk equation. Next, liquidity balances are the result of the operating needs of the firm. Having information about value of liquidity we can better dissolve the problem of liquidity management. The net working capital management leaning on the information about the intrinsic value of liquidity drives to increase of the value of the firm. The theses of article show how firm should manage net working capital to maximise value of the firm.