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Working Capital Management Essay

2018 Words9 Pages

Name: Lau Li Yee Matric No.: 52217
Title: Working capital management and corporate performance: Case of Malaysia
Author: M. A. Zariyawati, M. N. Annuar, H. Taufiq, A.S. Abdul Rahim
Journal: Journal of Modern Accounting and Auditing
Volume/Issue/ Page (s): Vol.5, No.11, pp 47-54 Year: 2009

Summary (Introduction/ Objective/ Method/ Findings/ Conclusion):
Working capital is an important element in financial management during the financial decision making. This is because the working capital is reviewed as a part of investment in an asset that requires proper financing investment. Nevertheless, the working capital has always been neglected in financial decision making by managers because it involves the investment and financing in …show more content…

This study also reveals a crucial element in financial management, which is working capital management because it is almost untouched in Malaysia or very little research has been done in this area. According to the study, there are two specific objectives are used to examine the relationship between working capital management and profitability over an 11 year period. Two objectives are listed as the relationship between liquidity and profitability of the firms and to investigate the relationship between debt used by the firm and its profitability. The investigation of this issue can provide more insights and different evidence for the working capital management in emerging the capital market in …show more content…

In this study, they use a sample of 94 Pakistani firms listed on Karachi Stock Exchange for 6 years from 1999–2004. Similar to Shin and Soenen (1998), Deloof (2003), results of this study show that a strong negative relationship between elements of the working capital management and profitability of the firm. In another study, Lyroudi and Lazaridis (2000) used the food industry in Greek to explore the cash conversion cycle as a liquidity indicator of the firms and try to determine its relationship with the current and the quick ratios, with its component variables, and investigates the effects of the cash conversion cycle in terms of profitability, in debt and firm size. The results of their study show that there is a significant positive relationship between the cash conversion cycle and the traditional liquidity measures of current and quick ratios. The cash conversion cycle also positively related to the return on assets and the net profit margin, but had no linear relationship with the leverage ratios. Conversely, the current and quick ratios had a negative relationship with the debt to equity ratio, and a positive one with the times interest earned ratio. Finally, there is no difference between the liquidity ratios of large and small

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