Search results

11 – 20 of over 138000
Article
Publication date: 8 April 2014

Anna-Maria Talonpoika, Sari Monto, Miia Pirttilä and Timo Kärri

The cash conversion cycle (CCC) is widely used in the academic studies of working capital management and supply chain efficiency. The purpose of this paper is to introduce a…

2783

Abstract

Purpose

The cash conversion cycle (CCC) is widely used in the academic studies of working capital management and supply chain efficiency. The purpose of this paper is to introduce a modification of this measure that takes into account advance payments as a component of operational working capital.

Design/methodology/approach

A new measure, the modified cash conversion cycle (mCCC) is introduced and tested with empirical data of companies in Helsinki Stock Exchange.

Findings

The mCCC reveals the real efficiency of operational working capital in companies that receive advance payments to a remarkable extent.

Research limitations/implications

The mCCC can be used in empirical analysis in academic studies. In this paper, the empirical data are used only for testing the mCCC. The paper concerns received advance payments, but the mCCC can also be extended also to other components of operational working capital ignored by the traditional CCC.

Practical implications

The paper offers insights into the variations of CCC for class teachers, and business practitioners, particularly financiers, who deal with operational working capital, cash flow predictions and calculations.

Originality/value

There are current items that may have a remarkable effect on operational working capital, but traditionally only inventories, accounts receivable and accounts payable are discussed. The authors argue that also other current items should be taken into account, if they affect the efficiency of operational working capital. The new mCCC is encouraged to be used instead of the CCC when observing working capital management.

Details

International Journal of Productivity and Performance Management, vol. 63 no. 3
Type: Research Article
ISSN: 1741-0401

Keywords

Article
Publication date: 20 November 2020

Himanshu Seth, Saurabh Chadha, Satyendra Kumar Sharma and Namita Ruparel

This study develops an integrated approach combining data envelopment analysis (DEA) and structural equation modeling (SEM) for estimating the working capital management (WCM…

1365

Abstract

Purpose

This study develops an integrated approach combining data envelopment analysis (DEA) and structural equation modeling (SEM) for estimating the working capital management (WCM) efficiency and evaluating the effects of diverse exogenous variables on the WCM efficiency and firms' performance.

Design/methodology/approach

DEA is applied for deriving WCM efficiency for 212 Indian manufacturing firms over a period from 2008 to 2019. Also, the effect of human capital (HC), structural capital (SC), cost of external financing (CEF), interest coverage (IC), leverage (LEV), net fixed asset ratio (NFA), asset turnover ratio (ATR) and productivity (PRD) on the WCM efficiency and firms' performance is examined using SEM.

Findings

The average mean efficiency scores ranging from 0.623 to 0.654 highlight the firms operating at around 60% of WCM efficiency only, which is a major concern for Indian manufacturing firms. Further, IC, LEV, NFA, ATR revealed direct effect on the WCM efficiency as well as indirect effect on firms' performance, whereas CEF had only a direct effect on WCM efficiency. HC, SC and PRD had no effects on WCM efficiency and firms' performance.

Practical implications

The findings offer vital insights in guiding policy decisions for Indian manufacturing firms.

Originality/value

This study is the first to identify the endogenous nature of the relationship of HC, SC, CEF, IC altogether with firms' performance, compounded by the WCM efficiency, by applying a comprehensive methodology of DEA and SEM and provides an efficiency performance model for better decision-making.

Details

Benchmarking: An International Journal, vol. 28 no. 4
Type: Research Article
ISSN: 1463-5771

Keywords

Article
Publication date: 1 January 2000

VELLANKI S.S. KUMAR, AWAD S. HANNA and TERESA ADAMS

The systematic assessment of working capital requirement in construction projects deals with the analysis of various quantitative and qualitative factors in which information is…

Abstract

The systematic assessment of working capital requirement in construction projects deals with the analysis of various quantitative and qualitative factors in which information is subjective and based on uncertainty. There exists an inherent difficulty in the classical approach to evaluate the impact of qualitative factors for the assessment of working capital requirement. This paper presents a methodology to incorporate linguistic variables into workable mathematical propositions for the assessment of working capital using fuzzy set theory. This article takes into consideration the uncertainty associated with many of the project resource variables and these are reflected satisfactorily in the working capital computations. A case study illustrates the application of the fuzzy set approach. The results of the case study demonstrate the superiority of the fuzzy set approach to classical methods in the assessment of realistic working capital requirements for construction projects.

Details

Engineering, Construction and Architectural Management, vol. 7 no. 1
Type: Research Article
ISSN: 0969-9988

Keywords

Article
Publication date: 14 June 2013

Laura A. Orobia, Warren Byabashaija, John C. Munene, Samuel K. Sejjaaka and Dan Musinguzi

The purpose of this study was to examine the actions owner‐managers of small businesses undertake in managing working capital.

5557

Abstract

Purpose

The purpose of this study was to examine the actions owner‐managers of small businesses undertake in managing working capital.

Design/methodology/approach

The study adopted an exploratory research design. The point of saturation was achieved after ten owner‐managers were interviewed. Data were analyzed using content analysis technique with the aid of NVivo software. Verbatim texts were used to explain the emergent themes.

Findings

The findings indicate that in the absence of systems, structures and procedures, small business owner‐managers intuitively plan, monitor and control their working capital. The activities undertaken include; reliance on memory and oral agreements, informal planning, assuming inventory limits, unconventional record keeping, cash flow based information management and giving credit to close associates.

Research limitations/implications

A more detailed investigation of the steps in the action sequence ma y advance our understanding of the process. Future studies need to test the effect of personal characteristics on working capital management process.

Practical implications

Owner‐managers of small businesses do not require the same degree of sophistication employed in planning, monitoring and controlling working capital. They require soft skills. Therefore, academicians, practitioners and policy makers need to emphasize knowledge management and cash accounting.

Originality/value

This study examines the process perspective of working capital management, an aspect that has not been adequately highlighted in previous studies.

Details

Qualitative Research in Accounting & Management, vol. 10 no. 2
Type: Research Article
ISSN: 1176-6093

Keywords

Article
Publication date: 17 December 2018

James Malm and Nilesh Sah

The purpose of this paper is to understand the association between litigation risk and working capital management.

1139

Abstract

Purpose

The purpose of this paper is to understand the association between litigation risk and working capital management.

Design/methodology/approach

The authors employ four different regression techniques (OLS regressions, regressions with industry and time controls, median regressions, and Fama Macbeth regressions) to study the relation between litigation risk (contemporaneous and lagged measures) and working capital management (cash conversion cycle (CCC) and its components). The authors also conduct numerous robustness tests.

Findings

The authors find that high-litigation risk firms tend to have longer CCC. Decomposing CCC into days receivable outstanding, days inventory outstanding and days payable outstanding, the authors find that high-litigation risk firms have longer receivable periods, take a longer time to convert inventory to cash and do not pay their suppliers promptly. These results are robust to a series of robustness tests including using an alternate measure of working capital and accounting for firm type (high-tech vs labor intensive).

Originality/value

This paper contributes in several ways to the litigation and corporate finance literature. The authors identify another determinant of working capital management and document another avenue whereby legal institutions affect short-term financial decision making. The link between litigation risk and working capital management is of interest to the business community, financial economists, management and the investing public.

Details

Managerial Finance, vol. 45 no. 1
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 9 March 2012

Aruna Panda

The purpose of this paper is to analyze the status of gross and net working capital and their association with sales of Andhra Pradesh Paper Mills Ltd, with reference to the…

3028

Abstract

Purpose

The purpose of this paper is to analyze the status of gross and net working capital and their association with sales of Andhra Pradesh Paper Mills Ltd, with reference to the Indian paper industry over a decade, from 1999 to 2008.

Design/methodology/approach

The research is mainly based on secondary financial data obtained from the Centre for Monitoring Indian Economy (CMIE). It focused on the size, character, and annual growth rates of gross and net working capital of the company. In addition, it analyzed the growth trends of gross and net working capital of the company in relation to sales. With the help of the Karl Pearson's correlation model, the inter‐relationship between sales and working capital has been identified. Then the strength and significance of such a relationship has been tested with the use of other statistical tools such as coefficient of determination and Student's t‐test.

Findings

The major findings of the research showed that while there was an increase in sales positively, strongly, and significantly associated with an increase in gross working capital for both the company and the industry, its association with net working capital was negative, poorly related, weak, and insignificant for the company under study.

Originality/value

There is a dearth of studies in the world literature that discuss the relationship that exists between sales and working capital in India's paper industry, in general and Andhra Pradesh Paper Mills Ltd in particular, and therefore this research is expected to add significant value to exploring the said linkage.

Details

International Journal of Commerce and Management, vol. 22 no. 1
Type: Research Article
ISSN: 1056-9219

Keywords

Article
Publication date: 7 March 2019

Nufazil Altaf and Farooq Ahmad

The purpose of this paper is to examine the relationship between working capital financing and firm performance for a sample of 437 non-financial Indian companies. In addition…

4035

Abstract

Purpose

The purpose of this paper is to examine the relationship between working capital financing and firm performance for a sample of 437 non-financial Indian companies. In addition, this study examines the impact of financial constraints on working capital financing–performance relationship.

Design/methodology/approach

The study is based on secondary financial data of 437 non-financial Indian companies obtained from Capitaline database, pertaining to a period of 10 years (2007–2016). This study employs two-step generalized method of moments techniques to arrive at results.

Findings

Results of the study confirm the inverted U-shape relationship between working capital financing and firm performance. In addition, the authors also found that the firms that are likely to be less financially constrained can finance greater proportion of working capital using short-term debt.

Originality/value

This study contributes to the scant existing literature by testing the impact of financial constraints on the relationship between working capital financing and firm performance, representing a typical emerging market in India.

Details

International Journal of Managerial Finance, vol. 15 no. 4
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 6 June 2016

Anna-Maria Talonpoika, Timo Kärri, Miia Pirttilä and Sari Monto

The purpose of this paper is to develop strategies for financial working capital management and to present previous literature on financial working capital management and its…

11738

Abstract

Purpose

The purpose of this paper is to develop strategies for financial working capital management and to present previous literature on financial working capital management and its measures.

Design/methodology/approach

Qualitative comparative analysis is used to formulate the strategies, and the variables in the analysis have been selected from previous literature. Empirical data consists of 91 companies listed in the Helsinki Stock Exchange during 2008-2012.

Findings

The results indicate 11 possible strategies for financial working capital management which all aim at increasing financial working capital. There are suitable strategies for all companies independent from their profitability, capital intensity or working capital requirements.

Research limitations/implications

The presented strategies have been created theoretically and have not been tested in companies, which could be done in future research.

Originality/value

This study has three contributions. First, previous literature on financial working capital management is reviewed. Second, a novel measure for financial working capital is developed. Third, strategies for financial working capital management are presented.

Details

International Journal of Managerial Finance, vol. 12 no. 3
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 19 July 2019

Himanshu Seth, Saurabh Chadha and Satyendra Sharma

The purpose of this study is to get insights into working capital management (WCM) practices and the determinants of its efficiency prevailing in the Indian manufacturing sector…

Abstract

Purpose

The purpose of this study is to get insights into working capital management (WCM) practices and the determinants of its efficiency prevailing in the Indian manufacturing sector using firm-specific as well as macro-economic variables by examining three efficiency models, i.e. cash conversion cycle (CCC), cash conversion efficiency (CCE) and net working capital level (NWCL).

Design/methodology/approach

The study uses panel data techniques on 1,207 firms of the Indian manufacturing sector, as well as on its nine key manufacturing industries from 2008 to 2018 for the analysis.

Findings

Several firm-specific variables such as net fixed asset ratio, size of the firm, profitability, firm’s growth, asset turnover ratio, age of the firm, interest rate and leverage have significant effect on WCM efficiency, whereas total assets growth rate, gross domestic product growth rate and inflation rate have insignificant effect on WCM efficiency.

Research limitations/implications

The study provides new empirical evidence on the short-term liquidity management of manufacturing firms prevailing in the developing countries such as India. The findings are particularly relevant in the present scenario when the liquidity levels are decelerating and there is a marked slowdown in private credit flows to the manufacturing sector due to the problem of burgeoning non-performing assets.

Originality/value

This study examines WCM efficiency exhaustively by incorporating both firm-specific and macro-economic variables using three efficiency measures, i.e. CCC, CCE and NWCL, results of which emerged as an answer to an efficient WCM.

Details

Journal of Global Operations and Strategic Sourcing, vol. 13 no. 1
Type: Research Article
ISSN: 2398-5364

Keywords

Article
Publication date: 8 February 2016

Godfred Adjapong Afrifa

– This paper aims to examine the influence of cash flow on the relationship between net working capital and firm performance.

6724

Abstract

Purpose

This paper aims to examine the influence of cash flow on the relationship between net working capital and firm performance.

Design/methodology/approach

The paper uses unbalanced panel data regression analysis on a sample of 6,926 non-financial small and medium enterprises in the UK for the period from 2004 to 2013.

Findings

The results indicate a strong concave relationship between net working capital and performance in the absence of cash flow; however, the relationship becomes convex after taking cash flow into consideration. The results further show that firms with cash flow below the sample median exhibit lower investment in working capital, but firms with cash flow above the sample median have higher investment in working capital. The results suggest that managers should consider their firms cash flow when determining the appropriate investment to be made in working capital, so as to improve performance.

Practical implications

Overall, the results suggest that whilst firms with limited cash flow should strive to reduce investment in working capital, firms with available cash flow should increase investment in working capital to improve performance.

Originality/value

This current study incorporates the relevance of cash flow in assessing the association between working capital management and firm performance.

Details

Review of Accounting and Finance, vol. 15 no. 1
Type: Research Article
ISSN: 1475-7702

Keywords

11 – 20 of over 138000