The Effect of Working Capital on Profitability: Evidence from Romania

Claudiu Botoc ()

Ovidius University Annals, Economic Sciences Series, 2013, vol. XIII, issue 1, 1114-1118

Abstract: The golden rule of financial equilibrium state the noncurrent resources should finance noncurrent assets and current resources should finance current assets. Managing working capital suppose to provide cash, which is indispensable for a company to run its day-by-day activities. The main aim of this paper is to test for a sample of Romanian publicly companies if working capital is managed at an optimum level, and if companies hold too much or too less cash, which obviously would affect profitability. The results suggest that in order to increase profitability managers from Romanian publicly companies could increase profitability by reducing the number of days cash conversion cycle and, as second result, companies do not hold too much cash.

Keywords: profitability; working capital; days of inventories; days of accounts receivable; days of accounts payable. (search for similar items in EconPapers)
JEL-codes: G30 G31 G32 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:ovi:oviste:v:xii:y:2012:i:1:p:1114-1118

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