Profitable working capital management in industrial maintenance companies
Journal of Quality in Maintenance Engineering
ISSN: 1355-2511
Article publication date: 21 October 2013
Abstract
Purpose
The purpose of this paper is to analyze the impact of working capital management on profitability. This connection is further studied in industrial maintenance service companies.
Design/methodology/approach
Analytical modeling has been used as the research method. The empirical analyses have been made on the basis of financial statements.
Findings
The paper presents an analytical flexible asset management (FAM) model, which reveals a significant negative correlation between the cycle times of operational working capital and the return on investment. The importance of working capital management is emphasized in the industrial maintenance service sector, because of light fixed assets and good profitability.
Research limitations/implications
There are some mathematical limitations in the applicability of the model introduced in this paper. These limitations should be addressed in further research.
Practical implications
The FAM model can be utilized as a tool in decision making in firms, both in the short term and in the long term. On the basis of this paper, the decision makers can consider how important working capital management is in their industry. In the industrial maintenance service business, more attention should be paid to active management of working capital.
Originality/value
The FAM model is a new decision-making tool. The paper also contributes to the unexplored perspective of industrial maintenance companies. The paper is valuable to service companies, as the research of working capital management has mostly focussed on manufacturing industries.
Keywords
Citation
Marttonen, S., Monto, S. and Kärri, T. (2013), "Profitable working capital management in industrial maintenance companies", Journal of Quality in Maintenance Engineering, Vol. 19 No. 4, pp. 429-446. https://doi.org/10.1108/JQME-08-2013-0054
Publisher
:Emerald Group Publishing Limited
Copyright © 2013, Emerald Group Publishing Limited