This study investigates the association between traditional and alternative working capital
measures and the returns of industrial firms listed on the Johannesburg Stock E"change.
Twenty five variables for all industrial firms listed for the most recent 10 years were
derived from standardised annual balance sheet data of the University of Pretoria's Bureau
of Financial Analysis. Traditional liquidity ratios measuring working capital position,
activity and leverage, and alternative liquidity measures, were calculated for each of the
135 participating firms for the 1 0 years. These working capital measures were tested for
association with five return measures for every firm over the same period.
This was done by means of a chi-square test for association, followed by stepwise
multiple regression undertaken to quantify the underlying structural relationships between
the return measures and the working capital measures. The results of the tests indicated
that the traditional working capital leverage measures, in particular, total current liabilities
divided by funds flow, and to a lesser e"tent, long-term loan capital divided by net
working capital, displayed the greatest associations, and e"plained the majority of the
variance in the return measures.
At-test, undertaken to analyse the size effect on the working capital measures employed
by the participating firms, compared firms according to total assets. The results revealed
significant differences between the means of the top quartile of firms and the bottom
quartile, for eight of the 13 working capital measures included in the study. A
nonparametric test was applied to evaluate the sector effect on the working capital
measures employed by the participating firms. The rank scores indicated significant
differences in the means across the sectors for si" of the 13 working capital measures.
A decrease in the working capital leverage measures of current liabilities divided by funds
flow, and long-term loan capital divided by net working capital, should signal an increase
in returns, and vice versa. It is recommended that financial managers consider these
findings when forecasting firm returns. / Business Management / D. Com. (Business Management)
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:unisa/oai:uir.unisa.ac.za:10500/16070 |
| Date | 12 1900 |
| Creators | Smith, Marolee Beaumont |
| Contributors | Marx, Johan, Begemann, Egbert, 1942- |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | 1 online resource (xv, 172 leaves) |
Page generated in 0.002 seconds