Abstract:
Purpose: The impact of working capital management on profitability is
investigated in this study.
Design/methodology/approach: This study is confined to Sri Lankan Plantation
companies and is based on a survey of 17 listed companies on the Colombo Stock
Exchange. Colombo Stock Exchange-listed companies between 2011 and 2020.
The dependent variables of this study, net profit margin (NPM) and return on
equity, were used to quantify profitability (ROE). Also, the working capital
management is the independent variable and is determined by the cash conversion
cycle (CCC), accounts receivable days (ARD), account payable days (APD), and
inventory turnover days (ITD). Working capital management's effects on
profitability have been investigated using regression analysis.
Findings: The results demonstrate a significant relationship between profitability
as evaluated by NPM, ROE, ARD, APD, and CCC. ITD, however, has an
insignificant impact on ROE and NPM. The outcome also demonstrates that APD
has an insignificant impact on NPM for Sri Lanka's listed plantation companies.
Practical implications: Maintaining a suitable level of working capital would
help plantation companies increase their profitability.
Research limitations: The study consists of only 17 companies and is confined
to only plantation sector companies listed on CSE.
