THE INTERACTION OF WORKING CAPITAL MANAGEMENT AND PROFITABILITY MEASURES

Year 2015, Volume: 7 Issue: 13, 437 - 448, 15.11.2015

İlker Yılmaz

https://doi.org/10.14784/jfrs.69165

Cited By: 2

Abstract

In this article, the interaction between working capital management success and different measures of profitability was examined. When components of net working capital are kept at optimal levels, this situation benefits company to use resources more efficiently and helps profitability. Similarly, high levels of profitability helps avoiding idle working capital practices. By using a sample consisting of 172 non-financial companies traded Borsa Istanbul (BIST) in Turkey, and 5-year data covering 2009-2013, regressions were run to analyze how profitability affects working capital management which is measured in terms of Cash Conversion Cycle (CCC) and also how CCC affects profitability measures. Most of the alternative cases tested have given significant results. Decreasing CCC affect positively profitability measures. Similarly, improved level of profitability helps a better working capital management and affects inventory turnover, receivables collection and payable deferral. Although long-term financial decisions and policies have an important role in the sustainability and profitability of the companies, short-term financial management and working capital management which is the most important policy in this sense can also have a profound effect on the company success

Keywords

Working capital, profitability, liquidity

İŞLETME SERMAYESİ YÖNETİMİ VE KARLILIK GÖSTERGELERİ ARASINDAKİ ETKİLEŞİM

Abstract

Bu çalışmada, işletme sermayesi yönetiminin başarısı ile farklı karlılık göstergeleri arasındaki karşılıklı
ilişkiler ve etkileşim incelenmiştir. İşletme sermayesinin bileşenleri optimum seviyelerde tutulduğunda, bu
durum kaynaklarını daha etkin ve verimli kullanmasını sağlar ve karlılığı üzerinde olumlu bir etkiye yol açar. Benzer şekilde, yüksek karlılık göstergeleri atıl işletme sermayesi uygulamalarından kaçınmaya yardımcı
olur. Hisseleri Borsa İstanbul’da (BIST) işlem gören 172 reel sektör (finans-dışı) firmasının, 2009-2013 yılları
arasındaki 5 yıllık verilerini kullanarak, çeşitli panel data regresyon analizleri gerçekleştirildi. Karlılığın
işletme sermayesi yönetimini nasıl etkilediği, aynı zamanda işletme sermayesinin karlılığı nasıl etkilediği
analiz edildi. İşletme sermayesi yönetiminin temel göstergesi nakit çevrim döngüsüdür. Test alternatiflerinin
çoğu anlamlı sonuçlar vermiştir. Nakit çevrim döngüsünün kısaltılması karlılık göstergelerini olumlu
etkilemektedir. Aynı zamanda, karlılık göstergelerindeki iyileşme işletme sermayesi yönetimini olumlu
etkilemekte; stok devir hızı, alacak tahsi süresi ve borç ödeme süresi göstergelerini iyileştirmektedir. Uzun
vadeli finansal kararlar ve politikalar şirketlerin sürdürülebilirliği ve karlılığı üzerinde önemli bir role sahip
olmasına rağmen, kısa vadeli finansal yönetim ve bunun en önemli aracı olan işletme sermayesi yönetimi de
şirketi başarısı üzerinde çok önemli bir yere sahiptir.

Keywords

İşletme sermayesi, karlılık, likidite

References

• BRIGHAM, Eugene F., and HOUSTON,Joel F. (2009), “Fundamentals of Financial Management”, South- Western Publishing, pp.492-494.
• DELOOF, Marc (2003), “Does working capital management affect profitability of Belgian firms?”, Journal of Business Finance & Accounting, Vol. 30 Nos 3/4, pp. 573-88.
• ENQVIST, Julius, GRAHAM, Michael and NIKKINEN, Jussi (2014), “The impact of working capital management on firm profitability in different business cycles: Evidence from Finland”, Research in International Business and Finance 32, pp.36-49
• GARCIA-TERUEL, Pedro Juan and MARTINEZ-SOLANA, Pedro, (2007),”Effects of working capital management on SME profitability”, International Journal of Managerial Finance, Vol. 3 Iss 2 pp. 164 -177
• GENTRY, J.A., VAIDYANATHAN, R., LEE, R. and WAI, H. (1990), “A weighted cash conversion cycle”,Financial Management, Vol. 19 No. 1, pp. 90-9.
• GILL, Amarjit, BIGER, Nahum and MATHUR, Neil, 2010, “The relationship between working capital management and profitability: evidence from the United States”, Business Economics J. 10, 1–9.
• GITMAN, L.J. (1974), “Estimating corporate liquidity requirements: a simplified approach”, The Financial Review, Vol. 9, pp. 79-88.
• JOSE, Manuel L., LANCASTER, Carol and STEVENS, Jerry L. (1996), “Corporate return and cash conversion cycle”, Journal of Economics and Finance, Vol. 20, pp. 33-46.
• LAZARIDIS, Ioannis and TRYFONIDIS, Dimitrios 2006. “Relationship between working capital management and profitability of listed companies onthe Athens Stock Exchange”. J. Financial Management Anal. 19 (1), 26–35.
• ÖHMAN,Darush Yazdanfar Peter (2014),”The impact of cash conversion cycle on firm profitability “,International Journal of Managerial Finance, Vol. 10 Iss 4 pp. 442 - 452
• PADACHI, Kesseven (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, Vol. 2 No. 2, pp. 45-58.
• RICHARDS, Verlyn D. and LAUGHLIN, Eugene J. (1980), “A cash conversion cycle approach to liquidity analysis”, Financial Management, Vol. 9 No. 1, pp. 32-38.
• SHIN, Hyun Han and SOENEN, Luc (1998), “Efficiency of working capital management and corporate profitability”, Financial Practice & Education, Vol. 8 No. 2, pp. 39-45.
• SMITH, Keith (1980), “Profitability versus liquidity tradeoffs in working capital management”, in Smith, K.V. (Ed.), Readings on the Management of Working Capital, West Publishing Company, St Paul, MN, pp. 549-62.
• SOENEN, Luc (1993), “Cash conversion cycle and corporate profitability”, Journal of Cash Management, Vol. 13 No. 4, pp. 53-57.
• UKAEGBU, Ben 2014, “The significance of working capital management in determining firm profitability: evidence from developing economies in Africa”, Research in International Business and Finance 31, pp. 1–16.
• WANG, Yung Jang (2002), “Liquidity management, operating performance, and corporate value: evidence from Japan and Taiwan”, Journal of Multinational Financial Management, Vol. 12 No. 2, pp. 159-169.
• WOOLDRIDGE, Jeffrey M., (2002), “Introductory Econometrics, A Modern Approach” 2nd Edition, Thomson Learning, pp.430-432