Abstract:
This study investigated the relationship between the efficient working capital
management and the performance of Food & Beverage Companies in Sri
Lanka. To achieve the objectives of the study, the researcher used secondary
data of eighteen Food & Beverage Companies using annual reports published
during the period 2009-2015. The dependent variable, return on asset is used
as the measures for the Performance. The key independent variables used in
the analysis are receivables, stocks, cash and payables. The SPSS & E-views
were used to analyze the collected data by the researcher. According to the
outputs generated through statistical packages there is a significant
relationship between Credit Ratio & the Return on Asset, which is the measure
of the profitability. Similarly, there is a significant relationship between Debt
Collection period, Credit Payable Period, Cash Conversion Cycle and & the
Return on Asset. In addition, the results showed that there is a significant
negative relationship between ratio of debt collection period, Cash Conversion
Cycle and profitability. As well as there is positive relationship between ratio
of Creditor payable period, Current ratio and Profitability. The results also
show that there is a significant relationship between working capital and return
on assets of selected companies. It means that when the working capital
decreases it will lead to increase profitability of the firms. Further it was
recommended that the selected companies adequately plan and control their
credit policy, day to day operations and outstanding by the level of managers
with the discussions, board meetings, suggestions and proposals so as to
achieve the profitability.
