Effect of Working Capital Management on Firm Profitability: Empirical Evidence from Textiles Industry of Bangladesh.

Abstract

The main aim of this article is to examine the effect of working capital on profitability of Bangladeshi Textiles Companies. We collected data about a sample of 21 Bangladeshi Textiles Companies listed at the Chittagong Stock Exchange (CSE) from 2008 to 2012 and evaluated the data using multiple regression. The results reveal that working capital management and profitability is positively correlated in Bangladeshi Textiles Companies. The study further reveals that inventory of number of days, number of day’s accounts receivables, and cash conversion period are positively correlated with a firm’s profitability but the numbers of days accounts payable are negatively correlated.  The present study contributes to the existing stock of knowledge by examining the effect of working capital management on profitability in the context of an emerging capital market such as Bangladesh..

Keywords: Working capital management, Returns on assets, Accounts payable, Current ratio, Leverage. Cash Conversion Cycle.