The impact of working capital management on SME profitability – evidence from Kosovo

Ardi Ahmeti (), Yllka Ahmeti () and Skender Ahmeti ()
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Ardi Ahmeti: University of Prishtina, Economic Faculty Hasan Prishtina, Prishtina, Kosovo
Yllka Ahmeti: University of Tetovo, Economic Faculty, Tetovo,North Macedonia
Skender Ahmeti: University of Prishtina, Economic Faculty Hasan Prishtina, Prishtina, Kosovo

Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, 2022, vol. 40, issue 2, 459-478

Abstract: The study attempts to show the impact of working capital management on the profitability of ninety-eight Kosovo-based SMEs, primarily in the manufacturing and construction sectors. The data were obtained from the financial statements of these companies for the years 2010 through 2020, and the assumptions were verified using the Ordinary least square (OLS) method. To express SMEs profitability, return on assets (ROA) is taken as a dependent variable, while to express working capital management, independent variables are taken: the inventory turnover period (INTP), receivables collection period (TRCP), trade payable period (TPP), and cash conversion cycle (CCC). In addition, are taken four control variables (size of companies, current ratio, sustainable growth, and leverage), which are not a variable of interest in the study but could influence the outcomes. The results reveal that SMEs increase profitability by decreasing the cash INTP and increasing TRCP, TPP, and CCC. By analyzing the effect of working capi al management on profitability in the context of SMEs in Kosovo, this research contributes new knowledge to the existing literature.

Keywords: profitability; working capital management; SMEs; financial statements; Kosovo (search for similar items in EconPapers)
JEL-codes: G30 G31 G32 (search for similar items in EconPapers)
Date: 2022
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