Working Capital Management a Measurement Tool for Profitability: A Study on Pharmaceutical Industry in Bangladesh
Journal of Finance and Accounting
Volume 6, Issue 1, January 2018, Pages: 1-10
Received: Nov. 4, 2017;
Accepted: Nov. 20, 2017;
Published: Jan. 12, 2018
Views 1745 Downloads 142
Md. Amir Sharif, Department of Accounting & Information Systems, Begum Rokeya University, Rangpur, Bangladesh
Md. Rafiul Islam, Department of Accounting & Information Systems, Begum Rokeya University, Rangpur, Bangladesh
The paper is an attempt to show the relationship between working capital and the profitability function of pharmaceutical industry in Bangladesh. Working capital management as a financial strategy has its effects on liquidity as well as profitability of the firm. To serve the study mostly secondary data have been used of pharmaceutical companies listed in DSE & CSE and data include time series from annual reports of the selected companies. Sample size includes10 selected pharmaceutical companies and their five years annual data. Multiple regression and correlation have been used to analyze the data. To serve the study perspective, this paper considered the working capital indicators such as (Account Receivable Turnover in days, Account payable Turnover in days, Inventory Turnover in days and Cash conversion cycle) as independent variable where as Profitability indicator (Return on Assets) as dependent variable and found there is a significant relationship between the variables studied. Finally the study shows the rejection of Null hypotheses (H0) which mentions that there is significant effect of working capital on firm’s profitability. The inference drawn from the study would be able to provide the basis for rethinking the practices of working capital management for competitive survival.
Md. Amir Sharif,
Md. Rafiul Islam,
Working Capital Management a Measurement Tool for Profitability: A Study on Pharmaceutical Industry in Bangladesh, Journal of Finance and Accounting.
Vol. 6, No. 1,
2018, pp. 1-10.
Afza, T, & Nazir, M. S. (2007). Working capital management policies of firms: Empirical evidence from Pakistan. Journal of Economics and Finance, 20 (1), pp. 33–46.
Chiou, J. R., Cheng L., and Wu, H. W. (2006). The determinants of working capital management. Journal of American Academy of Business 10 (1), Cambridge, pp. 149-155.
Deloof, M. (2003). Does working capital management affect profitability of Belgian firms? Journal of Business Finance & Accounting, 30 (3), 573–587.
Einarsson, T., and Marquis, M. H. (2001). Bank intermediation over the business Cycle. Journal of Money, Credit and Banking 33 (4), pp. 876-899.
Eljelly, A. (2004). Liquidity-Profitability tradeoff: An empirical investigation in an emerging market. International Journal of Commerce & Management, 14 (2), pp. 48–61.
Gill A, Biger N and Mathur N (2010). The Relationship between Working Capital Management and Profitability: Evidence from the United States. Business and Economics Journal, Volume 2010; pp. 1-9.
Jason Kasozi (2017). The effect of working capital management on profitability: a case of listed manufacturing firms in South Africa. Investment Management and Financial Innovations (open-access), 14 (2-2), 336-346. doi: 10.21511/imfi.14 (2-2). 2017.05.
Jose, M. L., Lancaster, C. and Stevens, J. L. (1996). “Corporate return and CCC”, Journal of Economics and Finance, Volume 20, pp. 33-46.
kumar A, O. N & Ramanan T. R (2013) Working Capital Management and profitability: A Sensitivity Analysis. International Journal of Research and Development: A Management review. Volume 2, pp. 52 – 58.
Lawal, A. A. a*, Abiola, B. I. b, Oyewole, O. M. c, (2015): Effect of Working Capital Management on the Profitability of Selected Manufacturing Companies in Nigeria, International Journal of Sciences: Basic and Applied Research (IJSBAR) Volume 19, No 2, pp 370-386.
Lazaridis, I. & Tryfonidis (2006). Relationship between working capital management and profitability of listed companies in Athens Stock Exchange. Journal of Financial management and analysis 19 (1); pp. 26-35.
Lyroudi, K., & Lazaridis, J. (2000). The cash conversion cycle and liquidity analysis of the food industry in Greece. April 2012, Volume 2, No. 4; pp. 189-203.
Merville L. J., and Tavis, L. A. (1973). Optimal working capital management policies: A Chance-Constrained Programming Approach. Journal of Financial and Quantitative Analysis 8 (1), pp. 47-59.
Mr. Shivakumar, and Dr. N Babitha Thimmaiah. (2016). “WORKING CAPITAL MANAGEMENT - IT’S IMPACT ON LIQUIDITY AND PROFITABILITY - A STUDY OF COAL INDIA LTD.” International Journal of Research - Granthaalayah, 4 (12), 178-187. https://doi.org/10.5281/zenodo.223836.
Nazir, M. S., & Afza, T. (2009). Working capital requirements and the determining factors in Pakistan. ICFAI Journal of Applied Finance, 15 (4), pp. 28–38.
Niresh, J., Aloy, (2012). Trade-Off between Liquidity & Profitability: A Study of Selected Manufacturing Firms on Srilanka. Journal of Arts, Science & Commerce, University of Jaffna, Sri Lanka, Volume.–III, Issue–4 (2), October 2012; pp. 34-40.
Nzioki P. M, Kimeli S. K, Abudho M. R and Nthiwa J. M (2013) Management of working capital and its effect on profitability of manufacturing companies listed on Nairobi securities exchange (NSE), Kenya. IJBFMR 1; pp. 35-42.
Padachi, K. (2006). Trends in working capital management and its impact on firms’ performance: An analysis of Mauritian small manufacturing firms. International Review of Business Research Papers, 2 (2), pp. 45–58.
Quayyum, S. T. (2011) Effects of Working Capital Management and Liquidity: Evidence from the Cement Industry of Bangladesh. Journal of Business and Technology (Dhaka) Volume–VI, Number-01, pp. 37-47.
Qurashi, M., & Zahoor, M. (2017). Working capital determinants for the UK pharmaceutical companies listed on the FTSE 350 Index. International Journal for Academic Research in Accounting, Finance and Management Sciences, (1).
Raheman, A., & Nasr, M. (2007). Working capital management and profitability-case of Pakistani firms. International Review of Business Research Papers, 3 (1), pp. 279–300.
Sathyamoorthi, C. R. and L. B. Wally-Dima, (2008). “WCM: The Case of Listed Retail Domestic Companies in Botswana”, Journal of Management Research, Vol. 7, Issue 5, pp. 7-24.
Smith, M. Beaumont, E. Begemann, (1997). Measuring Association between Working Capital and return on Investment. South African Journal of Business Management. 28 (1); pp. 235-250.
Sunday. E. O, Abiola I. and Lawrencia. O. O. (2012). Working Capital Management, Firms’ Performance and Market Valuation in Nigeria. World Academy of Science, Engineering and Technology 6 (1), 2012; pp. 124-128.
Zariyawati, M. A., M. N. Annuar, H. Taufiq and A. S. Abdul Rahim, (2009). WCM and Corporate Performance: Case of Malaysia”, Journal of Modern Accounting and Auditing, Vol. 5, Issue 11, pp. 47-54.