Commerce and Management
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Item The Relationship between Working Capital Management and Corporate Profitability: Comparison between Manufacturing and Pharmaceutical Chemical companies in Sri Lanka(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2016) Kavishan, D.; Abeywardhana, D.K.Y.The objective of this research is to provide empirical evidence on the Relationship between Working Capital Management (WCM) and Corporate Profitability of Manufacturing and Pharmaceutical and Chemical companies in Sri Lanka. The Regression analysis is used as analytical techniques and the sample data collected for the period of Six years from 2010-2016 for 10 manufacturing companies and for 10 pharmaceutical and chemical companies listed in Colombo Stock Exchange (CSE). This study measures corporate profitability using Return on Assets (ROA) and independent variables are Inventory Turnover period (ITP), Average Collection Period (ACP) and Average Payable Period (APP) and control variables are firm size, debt ratio and sales growth. For pharmaceutical and chemical sector ITP and total assets shows significantly positive relationship with profitability and ACP, and APP is significantly negative with profitability. In contrast, for the manufacturing sector, ACP shows significantly negative relationship with profitability. This study suggests that Pharmaceutical and Chemical sector should focus on reducing the ACP and APP to increase the profitability thereby maximize the wealth of shareholders of the company. The firms in manufacturing sector should reduce the ACP to increase their profitability.Item Working Capital Management and Profitability: Comparative Study between Manufacturing Companies and Hotels Listed in Colombo Stock Exchange of Sri Lanka(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2016) Patabendige, A.P.D.M.; Abeywardhana, D.K.Y.Working capital is a company’s surplus of current assets over current liabilities, and it measures the extent to which it can finance any increase in turnover from other fund sources (Hill, 2013). Working capital management is relating to maintain a balance between current assets and current liabilities. It ensures the proper liquidity position of the company in order to settle the short term obligations and operating expenses. This study examines whether there is any impact of working capital management on profitability for the selected manufacturing companies and hotels listed on Colombo Stock Exchange (CSE) in Sri Lanka. Profitability measures by using Return on Asset (ROA) and working capital management measures by using Inventory Control Period (ICP), Average Collection Period (ACP), Average Payment Period (APP) and Cash Conversion Cycle (CCC). And also debt ratio, credit ratio and firm size used as control variables. Data collected from the annual reports of selected companies for 5 year period from 2010 to 2014. Data analyzed by using both correlation analysis and panel data regression models. This study compared the manufacturing sector and hotel & travel sector based on the result of the analysis. Based on the findings of this study, ACP has significant impact on profitability for the selected manufacturing firms. That means if a firm spend more time for collect money from its customers, then companies can increase their profits. For the hotel sector, ACP and APP have negative relationship with the Return on Asset and ICP has positive relationship with the ROA. This study suggests that manufacturing companies in Sri Lanka can maximize their profit by increasing the average collection period.Item The Impact of Working Capital Management on Profitability of Sri Lankan Manufacturing Companies(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2016) Dharmasena, N.W.G.N.P.; Abeywardhana, D.K.Y.This study investigates the impact of the Working Capital Management on profitability of Sri Lankan manufacturing companies. To achieve the objectives of the study, the researcher used secondary sources of data for a sample of 20 manufacturing companies using panel data analysis for the period of 2011-2015. The dependent variable Return on Assets (ROA) is used as a measure of profitability. The key independent variables used in the analysis are the Inventory Conversion Period (ICP), Average Collection Period (ACP), Average Payment Period (APP) and Cash Conversion Cycle (CCC). In this study pooled Ordinary Least Squares (OLS) method regression used for analysis. The impact of WCM on firm’s profitability is modeled using OLS regression equation to obtain the estimates. The results show that there is a positive relationship between ACP and profitability as well as APP and Profitability of Sri Lankan manufacturing companies. Therefore it implies that increase the number of days of accounts receivable, leads to increase profitability. Further this suggests that account receivable management is the significant factor in predicting profitability of the manufacturing sector companies in Sri Lanka. As a conclusion we can say that APP is the best measurement in determining profitability of manufacturing companies in Sri Lanka.Item Capital Structure and Profitability: An Empirical Analysis of SMEs in the UK(2015) Abeywardhana, D.K.Y.This study examines the relationship between capital structure and the profitability of non- financial SMEs in the UK for the period of 1998-2008. Using the Two Stage Least Squares, (2SLS) the results show a significant relationship with capital structure and profitability which is negatively related. The size of the firm appears a more important factor that determines the profitability in SMEs in the UK. There is consistent evidence for positive size- profitability relationship. The results of this study have shown that the capital structure of the firm has a significant influence on the profitability of SMEs in the UK. Especially, long-term debt to total assets ratio is negatively related with the profitability and this is an indication that SMEs are averse to use more equity because of the fear of losing the control.