Literature Review On Working Capital Management

CHAPTER 1: RESEARCH OVERVIEW

1.0 Introduction

The chapter of working capital management refers to utilizing two components of working capital which are current liabilities and assets to ensure the most financially efficient operation of the company and being monitored with a company’s managerial accounting strategy. The main purpose of working capital management is to ensure the company always sustains a sufficient cash flow to meet its short-term operating costs and short-term debt obligations. 1.1 Background of the Study

Other than capital structure and capital budgeting, working capital management is also a part of financing considerations that a finance manager of a corporation needs to determine (Ross, 2010). In each and every of a

Eljelly research, study about the relationship between profitability and liquidity. It is measured by cash conversion cycle and current ratio, with a sample of joint stock companies in Saudi Arabia. By using current ratio, found that there is negative relation between the company’s liquidity level and profitability by using correlation and regression analysis study. Besides, it is more obvious if the firms have the relationship of longer cash conversion cycle and high current ratios. However, in this study can conclude that cash conversion cycle is essential as a measure of liquidity than current ratio that affects profitability. At the industry level, it is found that the size variable also have impact on profitability. (Eljelly,

Therefore, it is optimal to find out the relationship between working capital management and profitability in the telecommunication industry in Malaysia, as there are insufficient researches conducted to identify the significance of the working capital management on such industry.

1.3 Research Objectives

1.3.1 General Objectives

The general objective of the research is to examine the impact of working capital management on profitability of telecommunication industry in Malaysia.

1.3.2 Specific Objectives

i. To evaluate the relationship between profitability and average collection period in the telecommunication industry of Malaysia; ii. To evaluate the relationship between profitability and inventory conversion period in the telecommunication industry of Malaysia; iii. To evaluate the relationship between profitability and average payment period period in the telecommunication industry of Malaysia; iv. To find out the relationship between profitability and cash conversion cycle in the telecommunication industry of Malaysia;

v. To test the relationship between profitability and debt ratio in the telecommunication industry of Malaysia; and vi. To study the relationship between profitability and current ratio in the telecommunication industry of