Abstract:
This is focused on identifuing the impact of Working Capital Management on the
Profitability of the Listed Companies in the Material Sector in Sri Lanka. Profitability
which is dependent variable is measured by Return on Assets. Working Capital
Management which is the independent variable is measured by using four dimensions
as Inventory Conversion Period, Debtors' Conversion Period, Creditors' Conversion
Period and Cash Conversion Cycle. The study has been considered the sample of 18
Listed Companies in the Material Sector in the Colombo Stock Exchange in Sri Lanka.
The secondary data has been collected for this study from published annual reports of
Listed Companies in the Material Sector for the period of five years from 2015-2019.
The data was analyzed using STATA 16. Working Capital Management refers to
management of current assets and current liabilities in the firms. Firms may have an
optimal level of Working Capital that maximizes their value. Prior evidence has
determined the relationship between Working Capital and Performance. Descriptive,
Correlation and regression analysis were performed. The results show that there is a
significant negative impact of Debtor Conversion Period and Cash Conversion Cycle
on the Profitability and also there is a significant positive impact of Creditor Conversion
Period on the Profitability of the Listed Companies in the Material Sector in Sri Lanka.
Furthermore it depicts that Inventory Conversion Period has insignificant negative
impact on the Profitability of the Listed Companies in the Material Sector in Sri Lanka.
In general paying suppliers longer and collecting payments from customers earlier, and
keeping product in stock less time, are all associated with an increase in the firms
performance. Managers, therefore, can increase firms' profitability by irnproving the
performance of management of working capital components.
