Commerce and Management

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    The effects of working capital management on profitability, liquidity, solvency and organic growth with special reference to SMEs: A review.
    (International Journal of Accounting & Business Finance, 2017) Semasinghe, D.M.; Mahasena, Senanayake; Dayaratna Banda, O.G.
    A well designed and implemented working capital management is expected to contribute positively to the creation of a firm's value and ultimately to its organic growth extent. The purpose of this paper is to review the trends in working capital management and its impact on firms' performance and organic growth as experienced in previous studies. The theoretical underpinnings have also been evaluated and recorded as preliminary comments. The examination of literature has been categorized, so as to consider micro aspects of: definitions, nature, generics of working capital management and the key contributions of profitability, liquidity, solvency leading to organic growth. On a macro footing the impact of small and medium enterprise on national development in Sri Lanka and hence the need for a differentiated approach has been examined. A strong significant relationship between working capital management and profitability, liquidity, solvency and financial health has been found in previous empirical work. A case in point would be to determine by further research the extent of presence of these value drivers and determine the extent to which they champion, the cause of value enhancement amidst an increasing trend in the short-term component of working capital financing as reflected in their respective 'financial architectures'. Adoption of 'cutting edge' strategies and tactics in relation to working capital management practice seems to be a need for most SMEs in Sri Lanka.
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    DETERMINING WORKING CAPITAL SOLVENCY LEVEL AND ITS EFFECT ON PROFITABILITY IN SELECTED INDIAN MANUFACTURING FIRMS
    (2010) Singh, K.; Asress, F.C.
    A well designed and implemented working capital management has a significant contribution for firms? profitability as well as to maintain liquidity powers. The purpose of this study is to assess working capital adequacy and its impact on profitability; to investigate the relationship between profitability and liquidity of firms. Natural logarithm of total current liabilities and Relative Solvency Ratio (RSR) are taken as dependent variables to measure the required size of current liabilities and firm?s solvency level respectively. Independent variables are sales, return on assets, current ratio, and cash conversion cycles. These are included in the panel data regression to assess for 250 firms for the period of 10 years. The regression result indicated that sales and cash conversion cycle have highly positive significant effect to determine required current liabilities (short term debt) whereas return on assets and current ratio have highly negative significant effect to determine required current liabilities. The result of negative association between profitability and liquidity is statistically insignificant. With the help of student t-test, the study also revealed that firms with adequate working capital achieved better performance than those firms which have less working capital in related to their operational sizes. Therefore, the null hypothesis that there is no difference between firms which have adequate working capital and less working capital in relation to their operational size on profitability is rejected as the p value is less than 0.05.