WORKING CAPITAL MANAGEMENT AND PROFITABILITY OF MANUFACTURING COMPANIES IN SRI LANKA: WITH SPECIAL REFERENCE TO LISTED MANUFACTURING COMPANIES IN THE COLOMBO STOCK EXCHANGE

A.M.I. Lakshan, R.M.S. Bandara

Abstract


Working Capital Management includes maintaining appropriate levels of current assets and current liabilities required by a firm. In practice, working capital management has become one of the most important issues in the organizations. The issue is vital in the manufacturing sector organizations. The impact of working capital management on profitability is investigated using 130 firm year observations covering 26 manufacturing sector listed companies in Sri Lanka. The investigation covers five years period from 2003 to 2007. No. of inventory days (ID), Accounts Receivable Days (AR), Accounts Payable Days(AP), and no. of days in cash conversion cycle (CCC) used as independent variables while profitability used as dependent variable. Correlation and regression analysis were used as measures of analysis. Results show positive relations among ID, AR, CCC and profitability. Finally, the results indicate longer cash conversion cycle increases the profitability in manufacturing sector enterprises.

Key words: Working Capital Management, manufacturing sector, profitability

For full paper: fmscresearch@sjp.ac.lk


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Faculty of Management Studies & Commerce