Examination of the Relationship between Stock Management and Profitability in Businesses: An Application on Borsa Istanbul Manufacturing Companies

Abstract

This study aims to investigate whether there is a significant relationship between inventory management and the profitability of enterprises operating in the manufacturing sector. The primary purpose of businesses is to maximize firm value. For this purpose, they want to determine the most accurate method to increase profitability by using their assets efficiently. The practical and efficient use of asset stocks with the least liquidity among current assets is thought to affect their profitability positively. The financial ratios of companies in the manufacturing sector traded on the BIST between 2019-2021 have been taken as data, and multiple regression analysis is used as the analysis method. The findings show a significant negative relationship between the stock/current assets ratio and profitability for all three years. A positive relationship is found with the 2019 net sales growth rate and a negative relationship with stock holding time. A positive and significant relationship is found between profitability and net sales rate for 2020. In summary, it can be said that businesses can increase their profitability by reducing their stocks.

Keywords

• Financial Performance
• Stock Management
• Regression Analysis

İşletmelerde Stok Yönetimi ile Kârlılık İlişkisinin İncelenmesi: BIST İmalat Şirketleri Üzerine Bir Uygulama

Abstract

Bu çalışmanın amacı imalat sektöründe faaliyet gösteren işletmelerin stok yönetimi ile karlılıkları arasında anlamlı bir ilişki olup olmadığının araştırılmasıdır. İşletmelerin temel amacı firma değerini maksimize etmektir. Bu hedefler doğrultusunda varlıklarını verimli şekilde kullanmak ve böylece karlılıklarını artırmak için en doğru yöntemi belirlemek isterler. Dönen varlıklar arasında en az likiditeye sahip olan stokların etkin ve verimli kullanımının firma karlılığı üzerinde olumlu yönde etkisi olduğu düşünülmektedir. BİST'te işlem gören imalat sektöründe faaliyet gösteren şirketlerin 2019-2021 yılları arasındaki finansal oranları veri olarak alınmış ve analiz yöntemi olarak çoklu regresyon analizi kullanılmıştır. Elde edilen bulgularda, stok/dönen varlıklar oranı ile karlılık arasında her üç yıl için anlamlı bir negatif ilişki bulunurken, 2019 net satış büyüme oranı ile pozitif, stokta bekleme süresi ile negatif bir ilişki bulunmuştur. 2020 yılı için karlılık ile net satış oranı arasında pozitif ve anlamlı bir ilişki bulunmuştur. Özetle işletmelerin stoklarını azaltarak karlılıklarını artırabilecekleri söylenebilir.

Keywords

• Finansal Performans
• Stok Yönetimi
• Regresyon Analizi

References

1. Abel, A.B., Eberly, J.C. and Panageas, S. (2013). Optimal inattention to the stock market with information costs and transactions costs. Econometrica, 81(4), 1455-1481. https://doi.org/10.3982/ECTA7624
2. Agha, H. (2014). Impact of working capital management on profitability. European Scientific Journal, 10(1), 374-381. Retrieved from https://core.ac.uk/
3. Akbulut, R. (2011). An application to measure impact of working capital management on profitability in firms in manufacture sector quoted on ISE. Journal of the School of Business Administration, Istanbul University, 40(2), 195-206. Retrieved from https://dergipark.org.tr/en/pub/iuisletme
4. Alipour, M. (2011). Working capital management and corporate profitability: Evidence from Iran. World Applied Sciences Journal, 12(7), 1093-1099. Retrieved from http://idosi.org/
5. Altunkilic, F. (2019). Financial analysis techniques applied in banks and case study (Unpublished doctoral dissertation). Istanbul Bilgi University, Institute of Graduate Programs, Istanbul.
6. Arabaci, H. and Cavdar, F. (2018). The importance of basic financial statements analysis in effective tax auditing. Social Sciences Research Journal, 7(4), 172-182. Retrieved from https://dergipark.org.tr/en/pub/ssrj
7. Arreola‐Risa, A. and Keblis, M.F. (2013). Design of stockless production systems. Production and Operations Management, 22(1), 203-215. https://doi.org/10.1111/j.1937-5956.2012.01343.x
8. Arrow, K.J., Harris, T. and Marschak, J. (1951). Optimal inventory policy. Econometrica: Journal of the Econometric Society, 19(3), 250-272. https://doi.org/10.2307/1906813

9. Atmaca, A.D. (2020). Inventory management in logistics and supply chain: Application in a steel business company (Unpublished doctoral dissertation). Maltepe University, Graduate School, Istanbul.
10. Aydin, D. (2018). Investigation of the coordination effect on the business performance among the units of logistics, marketing and production: A practice in Malatya (Unpublished doctoral dissertation). İnönü University Institute of Social Sciences, Malatya.
11. Aygun, M., Onal, E., Kilicli, Y. and Kipcak, E. (2018). The effect of stock management on firm performance: Evidence from Borsa Istanbul. Van Yuzuncu Yıl University Journal of Economics and Administrative Sciences, 3(6), 167-183. Retrieved from https://dergipark.org.tr/en/pub/vanyyuiibfd
12. Ayub, M.Y. (2015). Impact of working capital management on profitability of textile sector of Pakistan. International Journal of Information, Business and Management, 7(1), 174-192. Retrieved from https://ijibm.elitehall.com/
13. Baydas, M. (2020). Analysis of the relationship between financial performance and stock return: A comparison on Borsa Istanbul manufacturing firms (Unpublished doctoral dissertation). Necmettin Erbakan University, Institute of Social Sciences, Konya.
14. Brennan, M.J. and Copeland, T.E. (1988). Stock splits, stock prices, and transaction costs. Journal of Financial Economics, 22(1), 83-101. https://doi.org/10.1016/0304-405X(88)90023-2
15. Cakir, H.M. and Kucukkkaplan, I. (2012). Analyzing effects of working capital component on profitability and valuation at manufacturing firm in ISE for 2000 – 2009 period. The Journal of Accounting and Finance, (53), 69-86. Retrieved from https://dergipark.org.tr/en/pub/mufad
16. Colakoğlu, N. (2012). Software usage in inventory management: A company application in automotive supply industry sector (Unpublished doctoral dissertation). Aksaray University, Institute of Social Sciences, Aksaray.
17. Dadzie, K.Q. and Winston, E. (2007). Consumer response to stock‐out in the online supply chain. International Journal of Physical Distribution & Logistics Management, 37(1), 19-42. https://doi.org/10.1108/09600030710723309
18. Deloof, M. (2003). Does working capital management affect profitability of Belgian firms? Journal of Business Finance & Accounting, 30(3‐4), 573-588. https://doi.org/10.1111/1468-5957.00008
19. Destereci, P. (2009). The financial analysis methods employed regarding loans and credit rating in Turkish banking system (Unpublished doctoral dissertation). Namık Kemal University, Institute of Natural and Applied Sciences, Tekirdag
20. Dincergok, B. (2019). The relationship between working capital management and profitability: Testing the nonlinear relationship in Istanbul Stock Exchange chemical, petrolium, rubber and plastic products sector. Journal of Accounting and Finance, 82, 161-176. https://doi.org/10.25095/mufad.536037
21. Enqvist, J., Graham, M. and Nikkinen, J. (2014). The impact of working capital management on firm profitability in different business cycles: Evidence from Finland. Research in International Business and Finance, 32, 36-49. https://doi.org/10.1016/j.ribaf.2014.03.005
22. Ertugrul Ayranci, A. (2019). The effectiveness of Williams method in determination of factors affecting financial failure: the example of ISE industrial businesses. Eurasian Academy of Sciences Eurasian Econometrics, Statistics & Emprical Economics Journal, 14(3), 1-14. Retrieved from https://econstat.eurasianacademy.org
23. 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, 10, 1-9. Retrieved from https://citeseerx.ist.psu.edu
24. Iskenderoglu, O., Karadeniz, E. and Ayyildiz, N. (2015). Financial analysis of the energy sector: Turkey and European energy sector comparison. Journal of Business and Economics Studies, 3(3), 86-97. Retrieved from https://dergipark.org.tr/en/pub/iicder
25. Jung, J.Y., Blau, G., Pekny, J.F., Reklaitis, G.V. and Eversdyk, D. (2008). Integrated safety stock management for multi-stage supply chains under production capacity constraints. Computers & Chemical Engineering, 32(11), 2570-2581. https://doi.org/10.1016/j.compchemeng.2008.04.003
26. Kazak, H. (2016). Strategic supplier assessment in retail market: A (An application) model for supplier assessment decision making process in supermarket industry (Unpublished doctoral dissertation). KTO Karatay University, Institute of Social Sciences, Konya
27. Kilavuz, R. (2009). Stock and cost auditing at industrial companies and an implementation (Unpublished doctoral dissertation). Marmara University, Institute of Social Sciences, Istanbul
28. Kisakurek, M. and Erdogan, S. (2021). Examining the relationship between inventories management and profitability: A research in ISE. Kahramanmaraş Sütçü İmam University Journal of Social Sciences, 18(3), 2065-2089. https://doi.org/10.33437/ksusbd.943302
29. Kizilboga, A. (2013). Inventory control methods and application (Unpublished doctoral dissertation). Marmara University, Institute of Pure and Applied Sciences, Istanbul.
30. Kinney, M.R. and Wempe, W.F. (2002). Further evidence on the extent and origins of JIT's profitability effects. The Accounting Review, 77(1), 203-225. https://doi.org/10.2308/accr.2002.77.1.203
31. Kiraci, M. (2009). An analysis of the relationship between inventory management and profitability through financial ratios: A research on ISE manufacturing industries. METU Studies in Development, 36, 161-195. Retrieved from https://open.metu.edu.tr
32. Koseoglu, S. (2019). Financial tables analysis in establishments and an application on real estate investment trust (Unpublished doctoral dissertation). Istanbul Okan University, Institute of Social Sciences, Istanbul.
33. Koumanakos, D.P. (2008). The effect of inventory management on firm performance. International Journal of Productivity and Performance Management, 57(5), 355-369. https://doi.org/10.1108/17410400810881827
34. Kowalski, J.C. (1991). Inventory to go: Can stockless deliver efficiency? Healthcare Financial Management: Journal of the Healthcare Financial Management Association, 45(11), 21-2. Retrieved from https://europepmc.org
35. Kurtlu, A. and Gobi, K. (2020). Investigation of uncompleted service production costs in accommodation enterprises in terms of TAS 2. Journal of Humanities and Tourism Research, 10(2), 313-325. http://dx.doi.org/10.14230/johut834
36. Lee, A.C., Lee, J.C. and Lee, C.F. (2009). Financial analysis, planning and forecasting: Theory and application (2nd ed.). Singapore: World Scientific Publishing Company.
37. Mutlu, D. (2015). Production model and an application in the planning of stocks (Unpublished doctoral dissertation). Anadolu University, Institute of Social Sciences, Eskisehir
38. Nobanee, H. and Al Hajjar, M. (2009). A note on working capital management and corporate profitability of Japanese firms (SSRN Working Paper No. 1433243). http://dx.doi.org/10.2139/ssrn.1433243
39. Ozolgun, H. (2017). Operating ratio analysis of companies. Turan Center for Strategic Research, 9(35), 94-100. http://dx.doi.org/10.15189/1308-8041
40. Park, J. and Simpson, T.W. (2005). Development of a production cost estimation framework to support product family design. International Journal of Production Research, 43(4), 731-772. https://doi.org/10.1080/00207540512331311903
41. Richard, H. and Parrish, M.S. (1986). The relationships between profitability, inventory efficiency, and gross margin return on investment in Alabama community pharmacies. Journal of Pharmaceutical Marketing & Management, 1(1), 203-225. https://doi.org/10.3109/J058v01n01_03
42. Saglam, M. and Karaca, S.S. (2015). The effect on firm profitability of component of working capital: An application over Istanbul Stock Exchange firms. Gaziosmanpasa University The Journal of Social Sciences Research (JSSR), 10(1), 119-132. Retrieved from https://dergipark.org.tr/en/pub/gopsbad
43. Saldanli, A. (2012). The relationship between liquidity and profitability-an empirical study on the ISE- 100 manufacturing sector. Journal of Suleyman Demirel University Institute of Social Sciences, 16, 167-176. Retrieved from https://dergipark.org.tr/en/pub/sbe
44. Sayaduzzaman, M.D. (2006). Working capital management: A study on British American Tobacco Bangladesh Company Ltd. Journal of Nepalese Business Studies, 3(1), 78-84. https://doi.org/10.3126/jnbs.v3i1.484
45. Saygili, E.E. and Sahin, Y. (2018). The relationship between financial performance and investors’ decisions: TOPSIS application in ISE cement industry. Izmir Democracy University Social Sciences Journal, 1(1), 16-45. Retrieved from https://dergipark.org.tr/en/pub/idusos
46. Shin, H.H. and Soenen, H.L. (1998). Efficiency of working capital management and corparate profitability. Financial Practice & Education, 8(2), 37-45. Retrieved from https://www.semanticscholar.org
47. Truel, P.G. and Martinez, S.P. (2007). Effects of working capital management on SME profitability. International Journal of Managerial Finance, 3(2), 164-177. https://doi.org/10.1108/17439130710738718
48. Ulker, Y. and Arslan, O. (2020). Investigation of the relationship between stock management and profitability by using financial ratios: An application in manufacturing sector. Anemon Mus Alparslan University Journal of Social Sciences, 8(4), 1153-1163. https://doi.org/10.18506/anemon.668756
49. Ulker, Y. and Iskender, H. (2005). A reliable system in calculating true cost: Activity based costing and the case of John Deere. Balıkesir University The Journal of Social Sciences Institute, 8(13), 189-217. Retrieved from https://dergipark.org.tr/en/pub/baunsobed
50. Wang, Q., McIntosh, R. and Brain, M. (2010). A new-generation automated warehousing capability. International Journal of Computer Integrated Manufacturing, 23(6), 565-573. https://doi.org/10.1080/09511921003706215
51. Yildirim, A. (2009). Business growth dtrategies based on logistics management (Unpublished doctoral dissertation). Marmara University, Institute of Social Sciences, Istanbul.
52. Yildiz, B. and Akkoc, S. (2016). Explore working capital-profitability relation with a non-linear tool (ANFIS). Eskişehir Osmangazi University Journal of Economics and Administrative Sciences, 11(1), 285- 308. Retrieved from https://dergipark.org.tr/en/pub/oguiibf
53. Zorlu, G.H. (2018). Efficiency in stock control systems supported by industry 4.0 in logistics enterprises (Unpublished doctoral dissertation). Istanbul Okan University, Institute of Social Sciences, Istanbul.