Relationship between working capital management and profitability of listed companies in the Colombo stock exchange in Sri Lanka

Abstract

Working capital management occupies an important place in determining profitability. Several studies have been done in this regard. However, in this study concentrates on Sri Lankan context in a different way. The objective is to examine the relationship between working capital management and profitability. Analysis was based on data extracted from annual reports and accounts of the companies for the relevant period. Correlation and multiple regression analysis respectively were employed. The study covered 33 listed companies in Sri Lanka over the period of past 5 year from 2009 to 2013. The analyses were carried out on an overall basis. Their findings revealed that there was a significant positive relationship between net profit margin ratio and current ratio. The, there is a negative significant relationship between total assets ratio and net profit margin ratio. But, there were no relationship between current assets to total assets ratio, cash convention cycle and net profit margin ratio. Further, findings revealed that there was a significant impact working capital management on profitability.