Relationship Between Working Capital Management and Profitability in Turkey Industrial Listed Companies

Saglam, Necdet; Kagitci, Aziz; Büyükipekçi, Semih

doi:10.17265/1548-6583/2016.03.002

Cited by 1 publication

(2 citation statements)

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“…Many previous studies have suggested that working capital management decisions influence firms' profitability. Several of them even suggest that an adverse association could exist between diverse measures of working capital and profitability (Soenen 1993;Beaumont Smith and Begemann 1997;Soenen 1998, 2000;Wang 2002;Deloof 2003;Lazaridis and Tryfonidis 2006;Baños-Caballero et al 2014;Raheman and Nasr 2007;Ramachandran and Janakiraman 2009;Zariyawati et al 2009;Gill et al 2010;Erasmus 2010aErasmus , 2010bMansoori and Muhammad 2012;Ngwenya 2012;Napomech 2012;Makori and Jagongo 2013;Enqvist et al 2014;Ukaegbu 2014;Onodje 2014;Eldomiaty et al 2023). Nevertheless, Lyroudi and Lazaridis (2000), Sharma and Kumar (2011), Abuzayed (2012), andAkoto et al (2013) realize a positive connection amongst cash conversion cycles, return on investment, and net profit margin.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The results obtained revealed some inconsistency. Finally, Ngwenya (2012) considered the relationship between working capital management and profitability for a sample of 69 listed firms on the Johannesburg Stock Exchange (JSE) for the period of 1998. Ngwenya (2012 found a statistically significant negative relationship between gross operating profit and the cash conversion cycle and the number of days for accounts receivable.…”

Section: Literature Reviewmentioning

confidence: 99%

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Wine Companies’ Profitability in the Old World: Working Capital’s Impact

Candeias¹,

Dias

2023

Administrative Sciences

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The purpose—The aim of this paper is to explain the relationship between working capital and profitability in the context of the wine industry. Design/methodology/approach—Artificial neural networks were used to analyze the relationship between working capital management and the profitability of Old World firms, based on a sample of 324 firms. Findings—The results suggest a positive relationship between the cash conversion cycle and the profitability of winery firms. Thus, an increase in the cash conversion cycle seems to increase wine companies’ profitability. Thus, managers can generate shareholder value by increasing the cash conversion cycle to a reasonable level. Regarding days of payable outstanding, there is a negative influence of the average payment term on the profitability of wine companies. This leads to the fact that the longer a company takes to pay its creditors, the less profitable it appears to be. In terms of days sales outstanding, the results suggest the existence of a negative impact of the average collection period on the profitability of winery firms. In other words, a reduction in the number of days a firm receives payment for sales positively affects the firm’s profitability. Finally, the results of the study show a positive relationship between days of outstanding inventory and the profitability of wineries, suggesting that wineries that maintain sufficiently high inventory levels have higher profitability. These results indicate that managers could create value for their shareholders if they managed their working capital more efficiently. Practical limitations/implications—The neural network can predict profits based on working capital management. However, the applied research methodology should be extended to other business typologies and wine firms of other countries to allow the generalization of results. Originality/value—This paper is the first study on the impact of working capital management on the financial performance of companies in the wine sector, particularly in the Old World. The results are an input to the wine business sector literature, one of the most representative of regional economies in the countries focused. The applied methodology can be adopted more broadly and underlies managerial implications. For future research, a similar analysis can be envisaged for the New World, and a comparison between the two blocks of countries, given the difference in characteristics and techniques of wine production, could be made.

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