Working Capital Management Impact of Working Capital Management on Profitability

Working capital is the life blood and nerve center of business. Working capital is very essential to maintain smooth running of a business. No business can run successfully without an adequate amount of working capital. The goal of working capital management is to ensure that a firm is able to continue its operations and that it has sufficient ability to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable, and cash.The principle reason for this study is to examine impacts of working capital administration on return on assets.The results uncovered a negative association among the return on assets, inventory conversion period and the debtor collection period. Hence, management of organization can expand profits and returns of organizations by decreasing the stock conversion period, debtor collection period and decreasing the cash conversion cycle. On the other hand, they cannot build profits by extending the deferred payables.