Working capital management, cash flow and SMEs' performance

Afrifa, Godfred Adjapong; Tingbani, Ishmael

doi:10.1504/ijbaaf.2018.10010466

Cited by 7 publications

(7 citation statements)

References 20 publications

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“…The flip side of granting trade credit is that cash flow problems may occur due to the chance of uncollectible accounts (Ukaegbu, 2014), which also ties up funds in accounts receivable that could be left in a bank earning interest or invested elsewhere (Afrifa and Tingbani, 2018). Reducing DSO not only avoids these negative effects, but also makes more cash available for firms to pay their short-term obligations on time, reducing the likelihood of bankruptcy (Altaf and Shah, 2018;Autukaite and Molay, 2011).…”

Section: Days Sales Outstandingmentioning

confidence: 99%

“…Practicing a higher DSI reduces the risk of stockouts and production shortages (Blinder and Maccini, 1991;Deloof, 2003;Mathuva, 2010;Ukaegbu, 2014). Additionally, bulk purchasing of raw materials reduces supply costs and allows for obtaining quantity discounts (Afrifa and Tingbani, 2018;Blinder and Maccini, 1991;Mathuva, 2010).…”

Section: Days Sales Of Inventoriesmentioning

confidence: 99%

“…On the other hand, investing in inventories absorbs funds needed for other areas (Abuzayed, 2012;Sagan, 1955). Additionally, the higher the level of inventories, the higher the costs of storage, insurance, and obsolescence (Afrifa and Tingbani, 2018;Altaf and Shah, 2018;Blinder and Maccini, 1991), factors that increase the uncertainty regarding firms' cash flows.…”

Section: Days Sales Of Inventoriesmentioning

confidence: 99%

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Is there an optimal working capital management that minimizes European stock risk?

2024

EJABM

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This paper investigates the existence of an optimal point of the cash conversion cycle (CCC) and its components, which minimizes firms' stock risk. Methodology:This study applies fixed effect models to a sample of firms listed in Euronext exchanges, from 2011 to 2019. Stock risk is proxied by the standard deviation of stock returns. The quadratic function of the CCC and its components (days sales outstanding -DSO, days sales inventory -DSI, and days payable outstanding -DPO) is applied to capture an optimal point of the working capital management (WCM).Results: Results show the existence of a U-shaped relation between WCM and stock risk, suggesting the existence of an optimal CCC and DSI point that minimizes stock risk Originality: To the best of our knowledge, this is the first paper that explores the existence of an optimal CCC point and also an optimal point of its components (DSO, DSI, and DPO), which minimizes stock risk. This paper is also the first to assess the impact of WCM on stock risk of firms listed in European stock exchanges. The results are also relevant to managers, shareholders, and investors since they demonstrate that firms can minimize the risk of their stocks by practicing an optimal WCM.

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Section: Days Sales Outstandingmentioning

confidence: 99%

Section: Days Sales Of Inventoriesmentioning

confidence: 99%

Section: Days Sales Of Inventoriesmentioning

confidence: 99%

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Is there an optimal working capital management that minimizes European stock risk?

2024

EJABM

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“…Empirical examination for several factors that theoretically relate to profitability was affected in previous studies. This includes financial leverage (Grau and Reig, 2021); size (Mijić et al , 2018; Abeyrathna and Priyadarshana, 2019); return on total assets (Afrifa and Tingbani, 2018); net operating profit (Menicucci, 2018); receivables turnover ratio, liquid ratio and WC to total assets (Singhania and Mehta, 2017); return on total assets (Kasozi, 2017); debt ratio and financial leverage (Le et al , 2020); return on invested capital and return on assets (ROA) (Jakpar et al , 2017); equity ratio (Herciu and Ogrean, 2017); market share (Blažková and Dvouletý, 2018); R&D (De Simone et al , 2020); and current assets ratio (Batchimeg, 2017). Addressed financial indicators were examined in different countries by previous studies.…”

Section: Literature Reviewmentioning

confidence: 99%

The determinants of profitability in non-financial UK SMEs

Youssef¹,

Salloum²,

Sayah³

2022

EBR

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Purpose The purpose of this study is to examine determinants of profitability of non-financial firms listed small- and medium-sized enterprises (SMEs) in the UK from 2012 till 2020. It has been argued that profitability plays a key role in economic development and growth. Despite the important role that SMEs play in developed economies like UK, academic research into SMEs profitability determinants in developed countries is not extensive. Design/methodology/approach The methodologies used include dynamic panel data estimation techniques. Relationship of nine independent variables with profitability was examined. Two models are created using return on assets (ROA) and return on equity (ROE) as dependent variables. Size, age, efficiency, working capital, liquidity, leverage and volatility of the firm represent firm-specific independent variables. Two macroeconomic variables, namely, gross domestic product and inflation are also used as independent variables. Data obtained from Thomson Reuters Data Stream for 93 listed SMEs companies in the UK from 2012 to 2020. Fixed effects, random effects and generalized method of moments were used in data analysis. Findings All variables showed significant influence on profitability, except liquidity reflecting insignificant impact on profitability in two regression models conducted for 93 firms under study. Efficiency, liquidity and leverage are the only three independent variables with similar impact on both ROA and ROE. Practical implications Identifying determinants of profitability will help stakeholders and corporate executive make sound decisions to ensure sustainability and stability at the firm level. This is particularly important given the key role played by SMEs in economic development and growth. The findings of this study would help direct financial management practices to ensure a favorable sustainable organizational performance. Originality/value This study differs from previous studies that focused mainly on developing countries; with limited research conducted on profitability of SMEs in developed economies. To the best of the author’s knowledge, this is the first study to examine factors influencing profitability of SMEs in UK. Previous studies concentrated on service sector like insurance and hotel firms.

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“…Managers must figure the cash sum most appropriate to their degree of movement and design the designing of the applicable installments and assortments. They ought to likewise draw up a strategy of interest in resources with high liquidity that can be changed over to cash at a low value-based expense, to fill in as help for the assets kept up by the business [5]. Propelled cash flow management is a lot of methods that follow up on the transient liquidity of a business.…”

Section: Introductionmentioning

confidence: 99%

An Empirical Study of Management of Cash Flow in SMEs and Organization

2021

cibg

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Present day management in SMEs accepted that cash flow management as one of the most significant instruments for checking and controlling the typical working of the business. Adequate cash flow management depends on the best possible gathering cash flow management and its understanding. To decide the ampleness of the utilization of this report and the significance connected to overseeing cash flows, as all around relevant information and aptitudes, research was acted in nearby SMEs through an overview. The impact of various profiles cash needs of SMEs according to various parts of the examination of the cash flows. The outcomes show that respondents with nonstop and occasional profiles cash needs have agreeable information regarding the matter research and the perspectives that are totally or halfway positive concerning: future cash flows as a significant determinant of the estimation of the endeavor, the places of complementarity articulations of cash flows in analyzed to the pay articulation and accounting report. SMEs that are not profiled your cash needs in the poll expressed conflict with the above sections, which speaks to an announcement of their deficient degree of information on the cash premise of financial detailing. Illiquidity of the household economy and the current circumstance direct the need of raising the nature of information and aptitudes in overseeing cash flows dependent on quality articulations of cash flows and going with examination.

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Working capital management, cash flow and SMEs' performance

Cited by 7 publications

References 20 publications

Is there an optimal working capital management that minimizes European stock risk?

Is there an optimal working capital management that minimizes European stock risk?

The determinants of profitability in non-financial UK SMEs

An Empirical Study of Management of Cash Flow in SMEs and Organization

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