International Research Journal of Finance and Economics

ISSN 1450-2887 Issue 49 (2010)

© EuroJournals Publishing, Inc. 2010
http://www.eurojournals.com/finance.htm

The Relationship between Working Capital Management and

Profitability: A Vietnam Case

Huynh Phuong Dong

Faculty of Accounting, Danang University of Economics, Vietnam
E-mail: pdong2000@gmail.com
Tel: +84989392392

Jyh-tay Su
Assistant professor at Southern Taiwan University, No.1 NanTai St
Yong Kang City, Tainan County, Taiwan R.O.C
E-mail: rogersu@mail.stut.edu.tw

Abstract

The working capital management plays an important role for success or failure of
firm in business because of its effect on firm’s profitability as well on liquidity. The study
is based on secondary data collected from listed firms in Vietnam stock market for the
period of 2006-2008 with an attempt to investigate the relationship existing between
profitability, the cash conversion cycle and its components for listed firms in Vietnam stock
market. Our finding shows that there is a strong negative relationship between profitability,
measured through gross operating profit, and the cash conversion cycle. This means that as
the cash conversion cycle increases, it will lead to declining of profitability of firm.
Therefore, the managers can create a positive value for the shareholders by handling the
adequate cash conversion cycle and keeping each different component to an optimum level.

Keywords: Corporate Profitability, Working Capital management, Vietnam stock market.

1. Introduction
Assets in commercial firm consist of two kinds: fixed assets and current assets. Fixed assets include-
land, building, plant, furniture, etc. Investment in these assets represents that of part of firm’s capital,
which is permanently blocked on a permanent or fixed basis and is also called fixed capital that
generates productive capacity. The form of these assets does not change, in the normal course. In the
contrast, current assets consist of raw materials, work-in-progress, finished goods, bills receivables,
cash, bank balance, etc. These assets are bought for the purpose of production and sales, like raw
material into semi-finished products, semi- finished products into finished products, finished products
into debtors and debtors turned over cash or bills receivables.
The fixed assets are used in increasing production of an organization and the current assets are
utilized in using the fixed assets for day to day working. Therefore, the current assets, called working
capital, may be regarded as the lifeblood of a business enterprise. It refers to that part of the firm’s
capital, which is required for financing short-term.
The management of this working capital is known as working capital management. The basis
objective of working capital management is to manage firm’s current assets and current liabilities, in
International Research Journal of Finance and Economics - Issue 49 (2010) 60

such a way, that working capital are maintained, at a satisfactory level. The working capital should be
neither more nor less, but just adequate.
Working capital management plays an important role in a firm’s profitability and risk as well as
its value (Smith, 1980). There are a lot of reasons for the importance of working capital management.
For a typical manufacturing firm, the current assets account for over half of its total assets. For a
distribution company, they account for even more. Excessive levels of current assets can easily result
in a firm’s realizing a substandard return on investment. However, Van Horne and Wachowicz (2004)
point out that excessive level of current assets may have a negative effect of a firm’s profitability,
whereas a low level of current assets may lead to lowers of liquidity and stock-outs, resulting in
difficulties in maintaining smooth operations.
Efficient management of working capital plays an important role of overall corporate strategy
in order to create shareholder value. Working capital is regarded as the result of the time lag between
the expenditure for the purchase of raw material and the collection for the sale of the finished good.
The way of working capital management can have a significant impact on both the liquidity and
profitability of the company (Shin and Soenen, 1998). The main purpose of any firm is maximum the
profit. But, maintaining liquidity of the firm also is an important objective. The problem is that
increasing profits at the cost of liquidity can bring serious problems to the firm. Thus, strategy of firm
must be a balance between these two objectives of the firms. Because the importance of profit and
liquidity are the same so, one objective should not be at cost of the other. If we ignore about profit, we
cannot survive for a longer period. Conversely, if we do not care about liquidity, we may face the
problem of insolvency. For these reasons working capital management should be given proper
consideration and will ultimately affect the profitability of the firm.
Working capital management involves planning and controlling current assets and current
liabilities in a manner that eliminates the risk of inability to meet due short term obligations on the one
hand and avoid excessive investment in these assets on the other hand( Eljelly,2004). Lamberson
(1995) showed that working capital management has become one of the most important issues in
organization, where many financial managers are finding it difficult to identify the important drivers of
working capital and the optimum level of working capital. As a result, companies can minimize risk
and improve their overall performance if they can understand the role and determinants of working
capital. A firm may choose an aggressive working capital management policy with a low level of
current assets as percentage of total assets, or it may also be used for the financing decisions of the firm
in the form of high level of current liabilities as percentage of total liabilities (Afza and Nazir, 2009).
Keeping an optimal balance among each of the working capital components is the main objective of
working capital management. Business success heavily depends on the ability of the financial
managers to effectively manage receivables, inventory, and payables (Filbeck and Krueger, 2005).
Firms can decrease their financing costs and raise the funds available for expansion projects by
minimizing the amount of investment tied up in current assets. Lamberson (1995) indicated that most
of the financial managers’ time and efforts are consumed in identifying the non-optimal levels of
current assets and liabilities and bringing them to optimal levels. An optimal level of working capital is
a balance between risk and efficiency. It asks continuous monitoring to maintain the optimum level of
various components of working capital, such as cash receivables, inventory and payables (Afza and
Nazir, 2009). A popular measure of working capital management is the cash conversion cycle, which is
defined as the sum of days of sales outstanding (average collection period) and days of sales in
inventory less days of payables outstanding (Keown et al, 2003). The longer this time lag, the larger
the investment in working capital. A longer cash conversion cycle might increase profitability because
it leads to higher sales. However, corporate profitability might also decrease with the cash conversion
cycle, if the costs of higher investment in working capital is higher and rises faster than the benefits of
holding more inventories and granting more inventories and trade credit to customers (Deloof, 2003).
Lastly, working capital management plays an important role in managerial enterprise, it may
impact to success or failure of firm in business because working capital management affect to the
profitability of the firm. The thesis is expected to contribute to better understanding of relationship
61 International Research Journal of Finance and Economics - Issue 49 (2010)

between working capital management and profitability in order to help managers take a lot of solutions
to create value for their shareholders, especially in emerging markets like Vietnam.

2. Literature Review
Many previous researches have indicated the relationship between working capital management and
profitability of firm in different environments. Shin and Soenen (1998) used a sample of 58,985 firm’s
years covering the period 1975-1994 in order to investigate the relationship between net-trade cycle
that was used to measured efficiency of working capital management and corporate profitability. In all
cases, they found a strong negative relationship between the length of the firm’s net-trade cycle and its
profitability.
Deloof (2003) investigated the relationship between working capital management and corporate
profitability for a sample of 1,009 large Belgian non-financial firms for the 1992-1996 periods. The
result from analysis showed that there was a negative between profitability that was measured by gross
operating income and cash conversion cycle as well number of day’s accounts receivable and
inventories. He suggested that managers can increase corporate profitability by reducing the number of
day’s accounts receivable and inventories. Less profitable firms waited longer to pay their bills.
Singh and Pandey (2008) had an attempt to study the working capital components and the
impact of working capital management on profitability of Hindalco Industries Limited for period from
1990 to 2007. Results of the study showed that current ratio, liquid ratio, receivables turnover ratio and
working capital to total assets ratio had statistically significant impact on the profitability of Hindalco
Industries Limited.
Lazaridis and Tryfonidis (2006) have investigated relationship between working capital
management and corporate profitability of listed company in the Athens Stock Exchange. A sample of
131 listed companies for period of 2001-2004 was used to examine this relationship. The result from
regression analysis indicated that there was a statistical significance between profitability, measured
through gross operating profit, and the cash conversion cycle. From those results, they claimed that the
managers could create value for shareholders by handling correctly the cash conversion cycle and
keeping each different component to an optimum level.
Raheman and Nasr (2007) have selected a sample of 94 Pakistani firms listed on Karachi Stock
Exchange for a period of 6 years from 1999-2004 to study the effect of different variables of working
capital management on the net operating profitability. From result of study, they showed that there was
a negative relationship between variables of working capital management including the average
collection period, inventory turnover in days, average collection period, cash conversion cycle and
profitability. Besides, they also indicated that size of the firm, measured by natural logarithm of sales,
and profitability had a positive relationship.
Finally, Afza and Nazir (2009) made an attempt in order to investigate the traditional
relationship between working capital management policies and a firm’s profitability for a sample of
204 non-financial firms listed on Karachi Stock Exchange (KSE) for the period 1998-2005.The study
found significant different among their working capital requirements and financing policies across
different industries. Moreover, regression result found a negative relationship between the profitability
of firms and degree of aggressiveness of working capital investment and financing policies. They
suggested that managers could crease value if they adopt a conservative approach towards working
capital investment and working capital financing policies.

3. Methodology
Data Collection
We utilize secondary data from listed companies in Vietnam stock market to investigate the
relationship between working capital management and profitability. The reason we choose Vietnamese
International Research Journal of Finance and Economics - Issue 49 (2010) 62

market because there have not been any research about this relationship in here. For the purpose of this
research, firms in financial sector, banking and finance, insurance, leasing, business service, renting,
and other service are excluded from the sample. The most recent period for this investigating is 2006-
2008. Some of the firms are not included in the sample due to lack information for the certain period.
The sample is based on financial statements of 130 firms that listed in Vietnam stock market. With 130
firms for period of 2006-2008, we have 390 observations totally.

Variables
The variables used in this study based on previous researches about the relationship between working
capital management and profitability.
Gross operating profitability that is a measure of profitability of firm is used as dependent
variable. It is defined as sales minus cost of goods sold, and divided by total assets minus financial
assets. For a number of firms in the sample, financial assets, which are chiefly shares in affiliated
firms, are a significant part of total assets. When the financial assets are main part of total assets, its
operating activities will contribute little to overall return on assets. Hence, that is the reason why return
on assets is not considered as a measure of profitability.
Number of days accounts receivable used as proxy for the collection policy is an independent
variable. It is calculated as (accounts receivable x 365)/sales.
Number of days inventories used as proxy for the inventory policy is an independent variable. It
is calculated as (inventories x 365)/ cost of goods sold.
Number of days accounts payable used as proxy for the payment policy is an independent
variable. It is calculated as (accounts payable x 365)/ cost of goods sold.
The cash conversion cycle used as a comprehensive measure of working capital management is
another independent variable. It is calculated as (number of days accounts receivable + number of days
inventory – number of days accounts payable).
Various studies have utilized the control variables along with the main variables of working
capital in order to have an opposite analysis of working capital management on the firm’s profitability
(Deloof, 2003; Lazaridis and Tryfonidis, 2006). The logarithm of sales used to measure size of firm is
a control variable. In addition, debt ratio used as proxy for leverage, calculated by dividing total debt
by total assets, and ratio of fixed financial assets to total assets are also control variable in the
regressions. According to Deloof (2003) fixed financial assets are mainly shares in affiliated firms,
intended to contribute to the activities of the firm that holds them, by establishing a lasting and specific
relation and loans that were granted with the same purpose.

4. Data Analysis
Descriptive Statistics

Table 1: Descriptive statistics

n Mean Std. deviation Minimum Maximum

AR 390 51.91 43.62 1.92 313.36
AP 390 45.40 43.29 1.74 313.91
INV 390 87.74 64.62 0.77 315.21
CCC 390 96.21 81.15 -121.7 410.65
LOS 390 26.61 1.35 23.22 30.67
DR 390 0.53 0.57 0.04 0.92
FATA 390 0.12 0.15 0.00 0.84
GROSSPR 390 0.35 0.41 -0.43 3.86
130 Vietnam non- financial firms, 2006-2008
• Number of days accounts receivable (AR)= Average of accounts receivable / Sales* 365
• Number of days accounts payable (AP)= Average of accounts payable / Cost of goods sold *365
63 International Research Journal of Finance and Economics - Issue 49 (2010)
• Number of days inventory (INV) = Average of inventory / Cost of goods sold * 365
• Cash conversion cycle (CCC) = AR+ INV- AP
• Natural Logarithm of sales (LOS) = ln(sale)
• Debt ratio (DR)= Total debt/ Total assets
• Fixed financial assets to total assets (FATA) = Fixed financial assets/ Total assets
• Gross operating profitability (GROSSPR) = ( Sales – Cost of goods sold)/ (Total assets – Financial assets)

Table 1 gives descriptive statistics for 130 Vietnam non financial firms for a period of three
years from 2006 to 2008 and for a total 390 firms- year observations. Looking at this table, we can see
that the average value of net gross operating profitability is 35.2% of total assets, and standard
deviation is 40.7%. This figure means that the value of profitability can deviate from mean to both
sides by 40.7%. The maximum and minimum values of net operating profitability are 3.86 and -0.43
respectively. Information from descriptive statistics also indicates that the mean of cash conversion
cycle that used as a proxy to check the efficiency in managing working capital is 96days and standard
deviation is 81 days. The average of number of days accounts receivable is 52 days with standard
deviation 44 days. Minimum time taken by a company to collect cash from customers is 2 days while
the maximum time for this goal is 313 days. The average time of paying to suppliers is 45 days and the
standard deviation is 43 days. Maximum time taken from firm to pay for their suppliers is 314 days
while minimum time taken for this purpose is 2 days. Moreover, it takes an average 88 days in order to
sell inventory with standard deviation of 65 days. Maximum time taken by a firm is 315 days, while
minimum time to convert inventory into sales is 1 day.
Natural logarithm of sales that measure the size of the firm is used as a control variable. From
Table 1 we can see that the mean of logarithm of sales is 26.61 and standard deviation is 1.35. The
maximum value of log of sales for a firm in a year is 30.67 while the minimum value is 23.22.
Debt ratio is used to check the relationship between debt financing and the profitability. It is
also used as a control variable. The result of descriptive statistics indicates that the average of debt
ratio is 53% with standard deviation of 57%. The maximum debt ratio financing used by a firm is 92%
which is unusual because of debt lager asset. However, it is also possible if the equity of the firm is
negative. While the minimum of debt ratio is 4%, this means that there is a company that uses a little
debt in its operation.
Finally, the fixed financial assets to total assets ratio is used to check the ratio of fixed financial
assets to the total assets of Vietnam firms. It is also utilized as a control variable. The mean value for
this ratio is 12% with a standard deviation of 15%. The maximum value of financial assets to total
assets is 84% and the minimum value for this purpose is nearly 0%.

Correlation Analysis

Table 2: Correlation matrix

AR AP INV CCC LOS DR FATA GROSSPR

AR 1.000
AP .408** 1.000
INV .285** .235** 1.000
CCC .543** -.115* .783** 1.000
LOS -.279** -.138** -.198** -.234** 1.000
**
DR -.035 .157 .043 -.028 -.040 1.000
FATA -.043 -.079 -.119* -.085 -.016 -.271** 1.000
GROSSPR -.223** .195** -.202** -.383** .172** .231** .075 1.000
** Correlation is significant at 0.01 level (2-tailed).
* Correlation is significant at 0.05 level (2-tailed).

The first, we have started our analysis of correlation results between the average collection
period (AR) and operating profitability. The result of correlation analysis shows a negative coefficient
International Research Journal of Finance and Economics - Issue 49 (2010) 64

– 0.223, with p value of 0.000. It shows that there is a high significant at α = 1%.This means that if
number of days accounts receivable increase, it will make operating profitability decrease. Correlation
result between inventory turnover in days (INV) and the operating profitability also indicate the same
type of result. The correlation coefficient is – 0.202 and p value is 0.000. It also shows a high
significant at α = 1%. It explains for reason why when the firm takes more time in selling inventory, it
will adversely affect its profitability. On the other hand, correlation result between number of days
accounts payable (AP) and the gross operating profitability is a positive. The correlations coefficient is
0.195 and p value is 0.000. It shows highly significant at α = 1%.This means that the more profitable
firms wait longer to pay their bills. The cash conversion cycle that is used as a comprehensive measure
of working capital management also has a negative correlation with the gross operating profitability
with coefficient -0.383 and p value is 0.000. It also shows highly significant at α = 1%. This
demonstrates that paying suppliers longer and collecting payments from customers earlier, and keeping
products in stock less time, are all associated with an increase in the firm’s profitability.
Result from analysis also shows a positive correlation between natural logarithm of sales that is
used to measure the size of firm and the operating profitability. Its coefficient correlation is 0.172 with
p value 0.001. It shows highly significant at α = 1%. This shows that as size of the firm increases, it
will increase its profitability and vice versa.
To sum, result from analyzing of correlation indicates that there is a negative between cash
conversion cycle, number of days accounts receivable, number of days inventories with the
profitability of firms are consistent with the research of Deloof (2003) and Raheman and Nasr (2007).
However, in their study, they indicated a negative relationship between number of days accounts
payable and profitability. Contrast, this research shows a positive relationship between number of days
accounts payable and profitability. This analysis suits with result of Lazaridis and Tryfonidis (2006).

Multiple Regression Analysis

A shortcoming of Pearson correlations is that they do not allow identifying causes from consequences.
Hence, we use regression analysis to investigate the impact of working capital management on
corporate profitability. The determinants of corporate profitability are estimated with a fixed effects
model. Fixed effects estimated assumes firm specific intercepts, which capture the effects of those
variables that particular to each firm and that are constant over time.
Model 1:
GROSSPRit = β0 + β1 (ARit) + β2 (DRit) + β3 (LOSit) + β4 (FATAit) + ε
In model 1, we use gross operating profitability (GROSSPR) as a dependent variable. Number
of days accounts receivable (AR) is used as an independent variable. While, Debt ratio (DR), Natural
logarithm of sales (LOS) and Fixed financial assets to total assets (FATA) are used as control
variables.

Table 3: Multiple Regression Analysis result (Model 1)

Dependent Variables Gross operating profitability(GROSSPR)

Independent variables β t-value Sig. VIF
AR -0.169 -3.418 0.001 1.091
DR 0.269 5.450 0.000 1.086
LOS 0.138 2.976 0.005 1.089
FATA 0.143 2.892 0.004 1.085
F-value 14.969 0.000
Durbin-Watson 1.863 n = 390
R-Sq=13.5% R-Sq(adj)=12.6%

Model 1 is estimated with fixed effects and includes number of days accounts receivable as a
measure of accounts receivable policy. The result of this regression indicates that the coefficient of
account receivable is negative with -0.169 and p-value is 0.001. It shows highly significant at α = 0.01.
65 International Research Journal of Finance and Economics - Issue 49 (2010)

This implies that the increase or decrease in accounts receivable will significantly affect profitability of
firm.
Debt ratio is used as a proxy for leverage, from analysis of regression shows that there is a
positive relationship with dependent variable. The coefficient is 0.269 and has significant at α = 0.01.
This means that if there is an increase in debt ratio it will lead to increase in profitability of firm. The
result also indicates that there is a positive relationship among logarithm of sale, fixed financial assets
to total assets and profitability. The coefficients are 0.138 and 0,143 respectively. Both of them are
significant at α = 0.01. It implies that the size of firm has effect on profitability of firm. The larger size
leads to more profitable.
The adjusted R2, also called the coefficient of multiple determinations, is the percent of the
variance in the dependent explained uniquely or jointly by the independent variables and is 12.6%.The
F statistic is used to test significant of R. From result of SPSS, we see that the model is fit with F-
statistics 14.969 and p-value is 0.000. It shows highly significant at α = 0.01.So concludes that at least
one of AR, DR, LOS, and FATA is related to GROSSPR.
Model 2:
GROSSPRit = β0 + β1 (APit) + β2 (DRit) + β3 (LOSit) + β4 (FATAit) + ε
In the model 2, there are the dependent variable gross operating profit and the same
independent variables as the first model 1equation. The only difference is number of days accounts
receivable variable replaced by number of days accounts payable variable

Table 4: Multiple Regression Analysis result (Model 2)

Dependent Variables Gross operating profitability(GROSSPR)

Independent variables β t-value Sig. VIF
AP 0.197 4.090 0.000 1.046
DR 0.252 5.105 0.000 1.102
LOS 0.121 4.462 0.000 1.021
FATA 0.162 3.313 0.001 1.082
F-value 16.384 0.000
Durbin-Watson 1.791 n = 390
R-Sq=14.5% R-Sq(adj)=13.7%

Looking at coefficients Table 4, we see that there is a positive relationship between number of
days accounts payable and profitability of firm. The coefficient is 0.197 and p value is 0.000. It shows
highly significant at α = 0.01. It implies that the increase or decrease in the average payment period
significantly affects profitability of the firm. The positive relationship between the average payment
period and profitability indicates that the more profitable firms wait longer to pay their bill.
The adjusted R2 is 13,7% and we see that F of the model is fit with F-statistics 16.384 and p-
value is 0.000. It shows highly significant at α = 0.01.
Model 3:
GROSSPRit = β0 + β1 (INVit) + β2 (DRit) + β3 (LOSit) + β4 (FATAit) + ε
The third model is run using the number of days inventories as an independent variable as
substitute of average payment period. The other variables are same as they have been in first and
second model.

Table 5: Multiple Regression Analysis result (Model 3)

Dependent Variables Gross operating profitability(GROSSPR)

Independent variables β t-value Sig. VIF
INV -0.167 -3.436 0.001 1.057
DR 0.280 5.688 0.000 1.081
LOS 0.153 3.150 0.002 1.045
FATA 0.133 2.688 0.007 1.096
International Research Journal of Finance and Economics - Issue 49 (2010) 66
F-value 15.004 0.000
Durbin-Watson 1.829 n = 390
R-Sq=13.5% R-Sq(adj)=12.6%

The result of regression indicates that the relationship between number of days inventories and
profitability is negative. The coefficient of this relationship is -0.167 and significant at α = 0.01.This
means that if the inventory takes more time to sell, it will adversely affect profitability.
The adjusted R2 is 12,6%.The coefficient of F statistic is 15.004 and has significant at α = 0.01.
Model 4:
GROSSPRit = β0 + β1 (CCCit) + β2 (DRit) + β3 (LOSit) + β4 (FATAit) + ε
In fourth model, cash conversion cycle is used as an independent variable instead of number of
days accounts receivable, number of days accounts payable and number of days inventories. The other
variables are kept the same as they were in the first three models.

Table 6: Multiple Regression Analysis result (Model 4)

Dependent Variables Gross operating profitability(GROSSPR)

Independent variables β t-value Sig. VIF
CCC -0.333 -7.081 0.000 1.078
DR 0.246 5.196 0.000 1.092
LOS 0.104 2.231 0.026 1.065
FATA 0.117 2.468 0.014 1.092
F-value 25.724 0.000
Durbin-Watson 1.906 n= 390
R-Sq=21.1% R-Sq(adj)=20.3%

The cash conversion cycle is used popular to measure efficiency of working capital
management. From result of regression running indicates that there is a negative relationship between
cash conversion cycle and operating profitability. The coefficient is -0.333 with p-value 0.000. It is
highly significant at α = 0.01. This implies that the increase or decrease in the cash conversion cycle
significantly affects profitability of the firm. The adjusted R2 is 20.3%.The coefficient of F statistic is
25.724 and has significant at α = 0.01.
All regression models were tested for multicollinearity. The variance inflation factor (VIF) or
the tolerances of the explanatory variables is used to detect whether one predictor has a strong linear
association with the remaining predictors. VIF measures how much the variance of an estimated
regression coefficient increases if your predictor are correlation (multicollinearity). The largest VIF
among all predictors is often used as an indicator of serve muticollinearity. All predictors had a
variance inflation factor ranged between 1and1.1, except of debt ratio in model 2 with value at 1.102,
which totally indicates that there is absence of multicollinearity between the predictors in the
regression models.

5. Conclusions
This paper support for existing literatures such as Shin and Soenen (1998), Deloof(2003), Raheman
and Nars (2007) and who found a strong negative relationship between the measures of working capital
management including the number of days accounts receivable, number of days inventories and cash
conversion cycle with corporate profitability. Moreover, this paper also adds to finding of Lazaridis
and Tryfonidis (2006) who claimed that there was a positive relationship between number of days
accounts payable and profitability.
The negative between corporate profitability that measured by gross operating profitability and
cash conversion cycle that used as measuring efficiency of working capital management shows that
cash conversion cycle is longer, profitability is smaller. This study suggests that managers can create
value for their shareholders by reducing the cash conversion cycle to a reasonable range.
67 International Research Journal of Finance and Economics - Issue 49 (2010)

Result from analysis of relationship between working capital management and profitability on
Vietnam stock market also indicates that there is a negative between number of days accounts receivable,
number of days inventories and profitability. So we claim that managers can increase profitability by
reducing the number of days accounts receivable and inventories. Besides, our research also shows that
more profitability firms wait longer to pay their bills.
However, the period of time for this study is shortly in compare with some of the previous
studies about the relationship between working capital management and profitability (Deloof, 2003,
Shin and Soenen, 1998). So, the sample does not highly stand for population. Moreover, the study only
refers to internal factors but not consider external factors as industry dummy, level of economic
activity (Lazaridis and Tryfonidis, 2006). Future research could further explore in order to overcome
these limits.

References
[1] Afza, T., & Nazir, M. (2009). Impact of aggressive working capital management policy on
firms' profitability. The IUP Journal of Applied Finance, 15(8), 20-30.
[2] Deloof, M. (2003). Does working capital management affect profitability of Belgian firms?
Journal of Business Finance & Accounting, 30(3-4), 573-588.
[3] Eljelly, A. M. (2004). Liquidity-profitability tradeoff: An Empirical Investigation in an
Emerging Market. International Journal of Commerce and Management, 14(2), 48-61.
[4] Filbeck, G., & Krueger, T. (2005). Industry related differences in working capital management.
Journal of Business, 20(2), 11-18.
[5] Garcia-Teruel, P. J., & Martínez-Solano, P. (2007). Effects of working capital management on
SME profitability. International Journal of Managerial Finance, 3(2), 164-177.
[6] Keown, A. J., Martin, J. D., Petty, J. W., & Scott, D. (2003). Foundations of Finance, 4ed:
Pearson Education, New Jersey
[7] Lamberson, M. (1995). Changes in working capital of small firms in relation to changes in
economic activity. Journal of Business, 10(2), 45-50.
[8] Lazaridis, I., & Tryfonidis, D. (2006). Relationship between working capital management and
profitability of listed companies in the Athens stock exchange. Journal of Financial
Management and Analysis, 19(1), 26-35
[9] Raheman, A., & Nasr, M. (2007). Working capital management and profitability-case of
Pakistani firms. International Review of Business Research Papers 3(1), 279-300.
[10] Shin, H. H., & Soenen, L. (1998). Efficiency of working capital management and corporate
profitability. Financial Practice and Education, 8(2), 37-45.
[11] Singh, J. P., & Pandey, S. (2008). Impact of working Capital Management in the Profitability of
Hindalco Industries Limited. Icfai University Journal of Financial Economics, 6(4), 62-72.
[12] Smith. (1980). Profitability versus liquidity tradeoffs in working capital management, in
readings on the management of working capital. New York,St. Paul: West Publishing
Company.
[13] Van Horne, J. C., & Wachowicz, J. M. (2004). Fundamentals of Financial Management (12
ed.). New york: Prentice Hall.