Many argue that there is a trade off between profitability and liquidity. However, many studies have found that the profitability can increase with an efficient Working Capital Management. Correctly allocating cash flows to where and when it is needed increases liquidity and simultaneously increasing profitability. The purpose of this study is to develop the research on the relationship between Working Capital Management and profitability by investigating how it is affected by different company characteristics. A quantitative method was applied with philosophical stances in objectivism and positivism and deductive theory was used to approach the subject. From the theoretical framework, five hypotheses were established and statistically tested in order to answer our research question. The first hypothesis was formulated to confirm previous research, while the remaining two aimed at providing both a theoretical and practical contribution to existing knowledge. The thesis centers on the Cash Conversion Cycle, a metric of how fast a company turns purchased products into profit, with Gross Profit Margin as the measure of profitability. The data analyzed is financial information from 2012, collected from a secondary source, Business Retriever database. In order to fulfill the purpose, hypotheses were tested. The first centered in previous research of the subject, while two were introduced based on research of company characteristics. This was tested in a cross-sectional study on the Swedish wholesale industry, covering a sample of 1,485 companies. The companies were segmented by size and whether they were listed or not. By using correlation and regression analyses, the relationship between Working Capital Management and profitability is compared between the different company groups. The conclusion drawn from the study is that there is a positive relationship between the Cash Conversion Cycle and profitability, inconsistent with previous research. However, strong significant results indicated that smaller firms are returning a higher profit, regardless the level of Cash Conversion Cycle. No difference was found in the sensitivity to changes in Working Capital Management strategies. This was true also for non-listed firms, although they were performing worse than listed firms in accordance to the theory presented. The foremost conclusion from the analysis is the weak explanatory power of the Cash Conversion Cycle on Gross Profit Margin. A debate is therefore included, discussing the possibility of lurking variables influencing the results. Keywords: Working Capital Management, Cash Conversion Cycle, Profitability, size, public, private, trade credit, wholesale industry, Sweden

<p>Den här uppsatsen syftar till att redogöra för i vilken mån Sveriges storföretag prioriterar arbetet med att optimera sitt rörelsekapital. Studien var av en explorativ sort där målet var att identifiera och uppmärksamma tidigare okända mönster och samband angående hur kapitalrationaliseringsarbetet utförs utifrån perspektiven fokus, ansvar och mätningar.Informationen som studien bygger på inhämtades genom en enkätundersökning som skickades ut till CFO:n på de 200 största svenska företagen rankade efter omsättning, exkluderat finansiella företag. Svarsfrekvens bland respondenterna blev 25 % då exakt 50 företag valde att svara på enkätutskicket. Enkäten skickades elektroniskt och besvarades genom att svara på ett webbaserat program.Resultatet från studien visade att majoriteten av Sveriges största företag prioriterar Working Capital Management. Till vilken nivå de väljer att fokusera på Working Capital Management beror på det enskilda företagets förutsättningar som till exempel vilken bransch de opererar inom.</p>

Den här uppsatsen syftar till att redogöra för i vilken mån Sveriges storföretag prioriterar arbetet med att optimera sitt rörelsekapital. Studien var av en explorativ sort där målet var att identifiera och uppmärksamma tidigare okända mönster och samband angående hur kapitalrationaliseringsarbetet utförs utifrån perspektiven fokus, ansvar och mätningar.Informationen som studien bygger på inhämtades genom en enkätundersökning som skickades ut till CFO:n på de 200 största svenska företagen rankade efter omsättning, exkluderat finansiella företag. Svarsfrekvens bland respondenterna blev 25 % då exakt 50 företag valde att svara på enkätutskicket. Enkäten skickades elektroniskt och besvarades genom att svara på ett webbaserat program.Resultatet från studien visade att majoriteten av Sveriges största företag prioriterar Working Capital Management. Till vilken nivå de väljer att fokusera på Working Capital Management beror på det enskilda företagets förutsättningar som till exempel vilken bransch de opererar inom.

Most of the construction industry's working capital is high demand, the face of the cash conversion cycle will also need to show stability of the state, to ensure smooth operation. Current construction industry is less focus on working capital , but this study suggests that working capital can be managed through the construction industry issues to explore and understand their working capital management, and thus the status of the problem to find a solution. This study proposes to financial report discusses the case Fu Tai Construction Co., Ltd of its working capital management on the effectiveness of performance, to understand the Working capital management impact on operating performance, follow-up on the case Fu Tai Construction Co., Ltd with discuss the strategies and effectiveness of analysis In this study, financial statements analysis and case study research. Financial Statement Analysis calculated for the relevant indicators, working capital management policies, including some working capital investment policy and financing policy, performance parts into return on assets, return on equity and net profit rate. Case study method and the main result of this case five Listed in working capital management policies and business performance in the indicators observed by comparing the value of the company's strengths and weaknesses of cases, followed by case discussion, strategies. Research results are as follows 1. Taiwan¡¦s Listed Construction Industry working capital management on the operational performance (1).Working capital assets policies: the fixed assets turnover rate will be affected by changes in time, but the ratio of current assets to total assets and total assets turnover rate is not; (2)Working capital financing policy: the current ratio, liquidity ratio and financing decisions liabilities to total assets does not change over time; 3. operating performance: net profit rate of the economy most affected by the return on assets and return on equity is affected to a lesser extent by the economy. 2. The case company's working capital management to improve the implementation of manner in response to the circumstances. (1).The case company policy of working capital assets, an indicator of quality of listed companies, little difference in the policy part of the working capital assets less the same general construction industry, there is no immediate urgency for improvement;(2) working capital financing policy of the indicators in the current ratio and financing decision-making ratio is less than the average listed company, with considerable room for improvement; (3).operating performance indicators are showing a lower level (0.03 to 0.12), representing the need to pay attention to the management of operational activities, to increase management efficiency in order to avoid unnecessary losses.

With the financial crisis, many firms suffered from liquidity shortages and needed to quickly change their way of working to release capital from the operations. Scholars argue that firms should handle immediate crisis with short-term measures first, and then change the underlying organizational routines to prevent recurrence. The management of working capital has received increased attention amongst corporate managers as a result of the crisis, whereby it is interesting to understand how firms can reduce their working capital in a sustainable way. By using the problem-finding and problem-solving approach, this study explores how successful firms have found and solved problems to make them sustainable. To answer the research question a multiple-case study is performed, where five firms are explored through interviews with key respondents. The study indicates that urgency is the main driver for both introducing and increasing the focus on working capital management. Different strategies for obtaining sustainable working capital management are found, where focus and commitment from the top management is suggested to be the glue that makes it last. It is furthermore suggested that managers have two main tools for creating and sustaining desired routines and practices; communication and control.

<p>This study investigates the effect of company characteristics on the working capital management. We employed quantitative method to examine the relationship between company characteristics and the cash conversion cycle as a measure of working capital management in Swedish listed companies. The company characteristics include profitability, operating cash flow, company size, sale growth, current ratio and debt ratio. The sample consists of 40 companies in the large cap investment segment listed on NASDAQ OMX Stockholm Exchange. Financial data are extracted from companies’ annual reports of year 2007 and 2008 in order to calculate financial ratios used in the study.</p><p> </p><p>Using regression analysis, our results indicate that profitability, operating cash flow, company size and sale growth affect the company’s working capital management. First, we find that there is a significant positive association between profitability and the cash conversion cycle. Second, we find that the cash conversion cycle have significant negative relationship with operating cash flow, company size and sale growth. Further, we examined the industry effect and find significant positive relations with the cash conversion cycle in four industry classifications as follows: materials, industrials, health care and information technology.</p>

This study investigates the effect of company characteristics on the working capital management. We employed quantitative method to examine the relationship between company characteristics and the cash conversion cycle as a measure of working capital management in Swedish listed companies. The company characteristics include profitability, operating cash flow, company size, sale growth, current ratio and debt ratio. The sample consists of 40 companies in the large cap investment segment listed on NASDAQ OMX Stockholm Exchange. Financial data are extracted from companies’ annual reports of year 2007 and 2008 in order to calculate financial ratios used in the study.   Using regression analysis, our results indicate that profitability, operating cash flow, company size and sale growth affect the company’s working capital management. First, we find that there is a significant positive association between profitability and the cash conversion cycle. Second, we find that the cash conversion cycle have significant negative relationship with operating cash flow, company size and sale growth. Further, we examined the industry effect and find significant positive relations with the cash conversion cycle in four industry classifications as follows: materials, industrials, health care and information technology.

Syfte:                  Working Capital Management handlar om rörelsekapitalstyrning och är enligt litteraturen av vikt speciellt för mindre företag. Anledningen är att deras kapitalstruktur består av en hög andel omsättningstillgångar och kortfristiga skulder. Working Capital Management innebär i stora drag att optimera rörelsekapitalet i företaget. Eftersom denna uppsats är en pilotstudie är syftet att göra en förundersökning om arbetet med Working Capital Management inom mindre och medelstora företag. Avstampet tas i forskningsfrågorna Använder sig mindre och medelstora företag av Working Capital Management? Känner de till begreppet? Metod:                Den vetenskapliga metoden är en deduktiv, kvalitativ forskningsansats. Primärdata samlas in via webenkäter som sedan analyseras och tolkas utifrån en kvalitativt och hermeneutisk ansats. Slutsatser:           Begreppet Working Capital Management överlag inte är något som de mindre och medelstora företagen vet innebörden av. Respondenterna anger att de inte använder sig av detta begrepp men svar på andra frågor motsäger detta då flertalet av de modeller och nyckeltal som ingår i begreppet ändock används.

Firms that face seasonal demand account for an important fraction of the U.S. economy. However, there is surprisingly little evidence on these firms' financing decisions. Yet, studying these decisions provides a natural setting to shed light on the types of capital (i.e. cash or debt) that firms use to manage short-term financing needs. Using seasonal firms as a setting to examine this issue, I show that seasonal financing needs are met with debt with low exposure to information asymmetry, such as short-term debt and trade credit. I further show that cash reserves, which have high carrying costs and can at time lead to agency problems, are not used for seasonal financing needs. Further, as financial flexibility theory would predict, I document that seasonal firms maintain more conservative financial policies to increase the ability to use debt for short-term financing needs. Specifically, seasonal firms are less levered and have long-term debt with a longer average maturity. Further, seasonal firms adjust toward leverage targets slower during fiscal quarters when debt is used for short-term financing. Overall, my findings indicate that firms minimize costs associated with short-term financing needs by using debt with low issuance costs and the use of this debt impacts the overall capital structure of the firm.

The primary objective of any corporation should be shareholder wealth maximisation. A firm's working capital policies have an effect on the firm's expected future returns and the risk associated with the returns, which ultimately have an impact on shareholder wealth. Efficient working capital management is a fundamental portion of the overall corporate strategy to create shareholder value. In this study the relationship of corporate profitability and working capital management was investigated. This relationship is examined using regression analysis. A sample of 118 firms listed on the Johannesburg Securities Exchange (JSE) for the period 2003 to 2007 was used. The purpose of this study is to establish whether a relationship exists between working capital management efficiency and profitability, considering the cash conversion cycle and operating profitability of the firm. The results of the regression analysis indicated that a statistical significance exists for three of the five years (2003 - 2005) analysed between profitability, measured with the gross operating profit, and the cash conversion cycle. It is observed (2003-2005 regression results) that a lower gross operating profit is associated with an increase in number of days accounts payable. The negative relationship between accounts receivable and firms' profitability (for 2003-2005) suggests that less profitable firms will pursue a decrease of accounts receivables in the attempt to reduce cash gap in the respective cash conversion cycles. The negative relationship between the number of days inventory and corporate profitability (for 2003-2005) suggests that a sudden decrease in sales accompanied by mismanagement of inventory, will lead to tying up excess capital at the expense of profitable operations. Managers or owners of firms can improve profits for firms by handling correctly the cash conversion cycle and keeping each individual component (accounts receivable, accounts payable and inventory) to an optimum level. These results (for 2003-2005) suggest that managers can create value for shareholders by reducing the cash conversion cycle and its individual components. / Thesis (M.B.A.)--North-West University, Potchefstroom Campus, 2009.