Working Capital Management and the Profitability of Non- Financial Firms Listed on the Zimbabwe Stock Exchange (ZSE)

Walter Gachira (), Washington Chiwanzwa (), Dingilizwe Nkomo () and Runesu Chikore ()
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Walter Gachira: Harare Institute of Technology, Zimbabwe
Washington Chiwanzwa: Harare Institute of Technology, Zimbabwe
Dingilizwe Nkomo: Harare Institute of Technology, Zimbabwe
Runesu Chikore: Harare Institute of Technology, Zimbabwe

European Journal of Business and Economics, 2014, vol. 9, issue 2, 517 volume1: 9

Abstract: Working capital is essential for the day-to-day operations of a firm. The study examines the impact of working capital management on the profitability of non-financial firms listed on the Zimbabwe Stock Exchange (ZSE). Using panel data methodology, the direction and extent of the impact of working capital management on profitability is scrutinised. The regression analysis is based on a panel sample of 39 non-financial firms listed on the ZSE from 2009 to 2013, the period under which the Zimbabwean economy has been operating under the multicurrency system. It was found that there is a positive relationship between debtors’ days and firm’s profitability, a negative relationship between creditors’ days and profitability and a positive relationship between firm’s cash conversion cycle and its profitability. There is some negative relationship between current ratio and profitability, while inventory turnover days and profitability are positively related. Debt to asset ratio as a control variable has a significant negative relationship with firm value and profitability. The results of the study show that for the companies included in the sample, there are mixed effects of the components of working capital on firm performance. Managers can thus create value for shareholders by taking note of the existence of such relationships and take measures that enhance firm profitability.

Keywords: Working CapitalProfitability; Liquidity; Multicurrency System (search for similar items in EconPapers)
JEL-codes: G3 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:aad:ejbejj:v:9:y:2014:i:2:p:517

DOI: 10.12955/ejbe.v9i2.517

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