Abstract:
Working Capital Management (WCM) is the management of short-term
financing requirements of companies. WCM impacts on both profitability and
liquidity of the companies. This study aims to investigate the impact of
working capital management on profitability of manufacturing sector small
and medium sized enterprises in Sri Lanka. This study makes use of twenty
manufacturing sector small and medium enterprises in Sri Lanka for the period
from 2010 to 2015. Study used secondary data, data were collected from
selected companies audited financial statements of relevant years. Multiple
regression model was used to investigate the relationship between working
capital management and companies’ profitability. The working capital was
measured by cash conversion cycle (CCC), average number of day-sales of
inventories (INV), average number of day-sales accounts receivable (AR) and
average number of accounts payable (AP) as independent variables and the
profitability was determined by return on assets (ROA) as dependent variable.
Finally, researcher finds that the positive relationship between CCC and AP
with ROA and AR is negatively related with ROA. So, the CCC, AR and AP
are significant factors to determine the impact profitability of manufacturing
small and medium sized enterprises in Sri Lanka. The INV is not a significant
factor. Therefore, INV does not impact on profitability of manufacturing small
and medium sized enterprises in Sri Lanka.
