Abstract:
Working Capital Management has its influence on liquidity as same the
profitability. Several studies (Deloof, M., 2003., Raheman A and M Nasr,
2007.),given emphasizing the importance of the short-term finance in firms.
The purpose of this research is investigates the impact of working capital
management on profitability of manufacturing companies in Sri Lank? The
trend in working capital needs and its implication to profitability of firms are
examined to identify the causes for any significant differences desirable
among the industries. Hence the present study was used regression analysis to
examine the hypotheses frame worked for the period of seven years from
2010-2016 with the total 182 observations and data collected from annual
financial statements. Working capital management were measured using
inventory period, trade receivable, trade payable, cash conversion cycle and
current ratio. Return on assets applied to measures of profitability Found of
this study showed a positive significant relationship between inventory
turnover period, trade receivable period, and significant negative relationship
with ROA. These findings of the study can be used cash conversion cycle
enhancing it will lead to reducing profitability of the firm, and managers
supports to create a positive value for the shareholders by reducing the cash
conversion cycle to a possible minimum level. The study also finds a
significant negative relationship between accounts payable and profitability
which is consistent with the view that less profitable firms delay long time to
pay their bills.
