Working capital and profitability of manufacturing companies

Gabija Kaikaryte

Master's thesis

Working capital management`s effect on profitability

Anotácia:

The financial state of the most companies was significantly challenged by the last decade. Thus, financial managers must be aware of all factors that can contribute to the firm`s profitability in order to fight unstable economical environment. Working capital management`s effect on profitability has been raised recently and its importance is already known. This thesis aims to dig deeper into the relationship between working capital management and firm`s profitability across different sectors and different time periods. The subject for the empirical analysis are 908 UK manufacturing and 315 construction firms during the period of 2006-2013. The results indicate about the strong negative relationship between working capital, measured as cash conversion cycle (CCC) and gross operating profitability. Thus, it is an indicator that working capital and its characteristics must be included in the firm`s financial planning.

Abstract:

The financial state of the most companies was significantly challenged by the last decade. Thus, financial managers must be aware of all factors that can contribute to the firm`s profitability in order to fight unstable economical environment. Working capital management`s effect on profitability has been raised recently and its importance is already known. This thesis aims to dig deeper into the relationship between working capital management and firm`s profitability across different sectors and different time periods. The subject for the empirical analysis are 908 UK manufacturing and 315 construction firms during the period of 2006-2013. The results indicate about the strong negative relationship between working capital, measured as cash conversion cycle (CCC) and gross operating profitability. Thus, it is an indicator that working capital and its characteristics must be included in the firm`s financial planning.

Kľúčové slová

Working capital, Business cycle, Profitability

Keywords

Profitability, Working capital, Business cycle

Jazyk práce: English

Datum vytvoření / odevzdání či podání práce: 30. 11. 2016

Obhajoba závěrečné práce

• Obhajoba proběhla 8. 6. 2017
• Vedúci: David Procházka
• Oponent: Marcela Žárová

Vysoká škola ekonomická v Praze

Master programme:
Finance and Accounting