Determinants of Working Capital Requirement on Manufacturing Firms
European Business & Management
Volume 5, Issue 1, January 2019, Pages: 1-6
Received: Apr. 3, 2019; Accepted: May 21, 2019; Published: Jun. 5, 2019
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Damot Alehegne, Department of Accounting and Finance, Raya University, Michew, Ethiopia
Endalachew Bekalu, Department of Accounting and Finance, Mekdela Amba Univrsity, Mekdela, Ethiopia
Abatneh Mengist, Department of Accounting and Finance, Jinka University, Jinka, Ethiopia
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Working capital investments are essential for daily business operations of an entity. For that matter firms make huge amounts of investments in working capital that enables them to pay recurring obligations. The main aim of this study is to investigate the determinants of working capital requirement of 35 large taxpayer manufacturing firms from food and beverage industry of Addis Ababa by employing explanatory research design with quantitative approach. Firms’ financial statements were collected for five years period from 2011 to 2015. Cash conversion cycle, return on asset, operating cash flow, leverage, firm size, growth rate, real GDP growth rate and inflation rate were used as an explanatory variables to measure the size or level of working capital requirement, and net working capital deflated by total asset were used as a dependent variable. Data was analyzed with the help of STATA (version 13) and, descriptive and correlation analysis and pooled panel data regression models of cross-sectional and time series data were employed. Results from the analysis revealed that there is statistically significant negative relationship between working capital requirement with leverage, firm size, real GDP growth rate and inflation rate. And there is positive and significant relationship between working capital requirements with cash conversion cycle.
Working Capital Requirement, Manufacturing Firms, Food and Beverage, Addis Ababa
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Damot Alehegne, Endalachew Bekalu, Abatneh Mengist, Determinants of Working Capital Requirement on Manufacturing Firms, European Business & Management. Vol. 5, No. 1, 2019, pp. 1-6. doi: 10.11648/j.ebm.20190501.11
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