The Impact Of Working Capital Management On Firm Value

Working Capital Management provides a general framework that will help managers understand working capital using a comprehensive approach that links operating decisions to their financial implications and to the overall business strategy. It will also help managers to gain a better understanding of the key drivers to profitability and value creation.

Corporate finance literature and finance practitioners have the notion that the efficient working capital management (WCM) affects firm value. This study investigates the value effect of working capital management, using a sample of 44 listed companies on the Colombo Stock Exchange (CSE) over the period 2011-2015. The CSE is currently recognized as a high growth frontier market (FM) in the world. The efficiency of WCM is measured using the Cash Conversion Cycle (CCC) and its components while firm value is measured by the Tobin Q ratio. The firm size, leverage and sales growth are used as the control variables. Using panel data regression methodology (the pooled OLS and fixed effects regressions), the study finds that CCC is inversely related to Tobin Q, suggesting that managers can create value for their shareholders by efficiently managing investment in working capital of their firms.

The study will examine the value of the firm and aggressive working capital management while considering the mediating effect of a firm's profitability. The study consist of 147 non-financial firms listed on the Pakistan Stock Exchange. The study period consists of years from 2009 to 2014. The finding reveals that aggressive working capital financing policy has a significant negative impact on profitability and firm value while aggressive investment policy discloses a significantly positive relationship with profitability. Profitability has a significant and positive impact on the firm's valuation therefore, profitability can mediate the relationship between the aggressive working capital management and the value of the firm. Therefore, we conclude that to enhance profitability through optimization of investment on current assets and by adding the proportion of long term financing in working capital. In the end, we have discussed some of our limitations and future research opportunities.

CD-ROM contains: World Bank data.

This book focuses on business firms as catalysts and agents of social and economic change, and explores the argument that sustainable development is the perfect opportunity for businesses to strengthen the evolving notion of corporate social responsibility, while achieving long-term growth through innovation, research and development.

Working capital refers to the money that a company uses to finance its daily operations. Proper management of working capital is critical to financial health and operational success. Working capital management (WCM) aims to maximize operational efficiency by maintaining a delicate balance among growth, profitability, and liquidity. WCM is a continuous responsibility focusing on a firm's day-to-day operations involving short-term assets and liabilities. By efficiently managing a firm's cash, accounts receivable, inventories, and accounts payable, managers can help maintain smooth operations and improve a company's earnings and profitability. By contrast, poor WCM could lead to a lower credit score, financial insolvency, legal troubles, liquidation of assets, and potential bankruptcy.This book provides an objective look into the dynamic world of WCM. Its coverage extends from discussing basic concepts and their applications to increasingly complex and real-world situations. The book stresses that WCM is a combination of both art and science. This volume spans the gamut from theoretical to practical while offering the right balance of detailed and user-friendly coverage. Readers can gain an in-depth understanding of this subject from experts in this field. Those who want a broad survey will benefit, as will readers looking for more in-depth presentations of specific areas within this field of study. In summary, Working Capital Management: Concepts and Strategies provides a fresh look at this intriguing but often complex subject of WCM.

A corporate speculator embraces a monetary assessment while choosing whether to put resources into substantial resources or different business. The speculator needs to guarantee that it pays close to a reasonable incentive to buy the venture and that the monetary benefit for its proprietors is augmented. The part talks about monetary assessment with regards to venture choices with an emphasis on speculation valuation and organizing and assessment procedures. Capital gave to an organization, and any value produced inside, should just be put resources into resources if esteem is made for investors—that is, the point at which the estimation of financial advantages emerging from the advantages surpasses the cost of procuring those advantages.

The success of any business depends on its profitability, liquidity, and solvency. Liquidity plays an important role in the successful running of a business. Many prior studies have been conducted to measure the relationship between working capital and profitability. The results showed that the high investment in inventories and receivables is associated with lower financial performance. They found a negative relationship between Return on Assets and Inventory turnover and Cash conversion cycle the present study is designed to know the direct impact of working capital on profitability by choosing the days of collection, days of payment, days inventory converts to sales and finally the cash conversion cycle. This study examines the association between the profitability and working capital using the data of 15 US trading companies for the period of 2015 to 2019. The key points in this study are firstly there exists a negative relationship between the profitability and the average collection period, the lower the average collection period higher will be the profitability, indicating that a decrease in the number of days a firm receives payment from sales affects the profitability of the firm positively. Secondly there is a highly significant positive relationship between average payment period and profitability. This implies that the longer a firm makes the payment to its creditors, the more profitable it is. Thirdly the cash conversion cycle decreases it will lead to an increase in profitability of the firm, and managers can create a positive value for the shareholders which indicates that it has been maintained. The regression analysis showed the value for the R-squared in the model is 0.584, i.e., 58.4% of the variation in the dependent variable Net Profitability is explained by the independent variables.

Financial Management and Analysis, Second Edition covers many important financial topics that are neglected elsewhere--from raising funds via securitization to managing a financial institution. This book provides valuable insights into many major aspects of financial management and analysis, and includes expert advice, real-world examples, useful charts and graphs, and incisive end-of-chapter questions that help develop the skill set necessary to deal with the important financial problems encountered in today's business world.