Management efficiency and profitability

Abstract

Management efficiency is an integral part of the overall corporate strategy to create shareholder value and for the survival of a business as it has direct impact of firm’s profitability. This study investigates the relationship between the management efficiency and profitability for a sample of 20 manufacturing companies listed on the Colombo Stock Exchange for the period of 5 years from 2007 to 2011. Descriptive and simple linear regression analyses were used to study the relationship between management efficiency and profitability. The results of the statistical test of the hypothesis indicated that the relationship between Fixed Assets Turnover has significant impact on Return on Assets and it is positive. And also the relationship between Fixed Assets Turnover and Net Profit is positive but it is in significant. The relationship between Total Assets Turnover and Return on assets is positive and significant while the relationship between Total Assets Turnover and Net Profit is positive and insignificant while Working capital turnover is insignificant in the study. The implication of this study can be used by the managers to improve their financial performance and formulate policies that will promote effective assets management system.