The Role of Business Cycles on the Relationship between the Company's Working Capital and the Profitability of Listed Companies in Tehran Stock Exchange

Abstract

Working capital management is one of the most important areas in financial management and business management taken into account, because it directly affects the liquidity and profitability of companies, the probability of bankruptcy for companies exposed to inappropriate management of working capital despite there is a positive profitability. Therefore, in this study to investigate the role of business cycles on the relationship between working capital and profitability of the company in the companies listed in Tehran Stock Exchange during the period 2014-2010 will be discussed. In this study, 107 companies in the period was determined. In order to reflect the profitability of the company of two variable rate of return on assets (ROA) and net operating income (GOI) was considered. Multivariate regression was used to test the significance of using the t test and F. Finally, it was determined that, in the first model the cycle of debt rate of return on assets is a significant and positive. While in the second model the cash conversion cycle, converting inventory and accounts receivable and a net operating profit is significant and positive.

Keywords: working capital, return on assets, operational net profit, Tehran Stock Exchange