Working Capital Management and Firm Profitability. Empirical Evidence for the Romanian Industry

MiloÅŸ Marius Cristian () and MiloÅŸ Laura Raisa ()
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MiloÅŸ Marius Cristian: West University of Timisoara
MiloÅŸ Laura Raisa: "Eftimie Murgu" University of Resita

Ovidius University Annals, Economic Sciences Series, 2017, vol. XVII, issue 2, 425-429

Abstract: The paper aims on empirically testing the connection between a firm's liquidity, or else a firm's ability to manage short-term liabilities, without undue stress and its profitability. We are using both a static and dynamic measure of firm liquidity: the traditional current liquidity ratio alongside one of the most frequent used working capital management indicator, the cash conversion cycle. An empirical analysis is performed based on 50 listed companies from Bucharest Stock Exchange, covering various industries. The empirical results are confirming the previous research that has confirmed the negative connection between the days sales outstanding (DSO), respectively the days inventory outstanding (DIO) and the profitability of the firm, while cash conversion cycle seems to be positively connected with the firm profitability, in contradiction with some of the previous empirical literature.

Keywords: ROA; cash conversion cycle; working capital; liquidity (search for similar items in EconPapers)
JEL-codes: G30 G32 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:ovi:oviste:v:xvii:y:2017:i:2:p:425-429

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