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Abstract
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Article Information:
Studying the Relationship between Working Capital Management and Profitability at Tehran Stock Exchange: A Case Study of Food Industry
Mosa Ahmadi, Iraj Saie Arasi and Maryam Garajafary
Corresponding Author: Maryam Garajafary
Submitted: December 27, 2011
Accepted: February 16, 2012
Published: July 01, 2012 |
Abstract:
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This study has investigated the relationship between working capital management and profitability
at companies of food industry group member at Tehran Stock Exchange. 33 companies were selected for a
period of five years from 2006-2011 and the effect of various variables of working capital management
including average accounts collection cycle, inventory turnover, medium-term debt payment and the cash
conversion cycle on operational net profit of companies. Current ratio, debt ratio and the company size (which
has been measured by natural logarithm of sale) was considered as control group (control variable). For data
analysis, correlation and regression was used. The results of the study showed that there is a reverse relationship
between the variables of working capital management and profitability. It is found out that increasing collection
cycle, debt payment period, inventory turnover and cash conversion cycle leads to decreasing profitability in
the companies. According to the research findings, managers can create a positive value for stockholders by
decreasing collection cycle, debt payment period, inventory turnover and cash conversion cycle to the lowest
possible level.
Key words: Average accounts collection cycle, cash conversion cycle, inventory turnover, medium-term debt payments, working capital management, ,
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Cite this Reference:
Mosa Ahmadi, Iraj Saie Arasi and Maryam Garajafary, . Studying the Relationship between Working Capital Management and Profitability at Tehran Stock Exchange: A Case Study of Food Industry. Research Journal of Applied Sciences, Engineering and Technology, (13): 1868-1874.
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ISSN (Online): 2040-7467
ISSN (Print): 2040-7459 |
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