An Analytical Review of the Effect of Working Capital Development on Financial Performance Measures

Abstract

In today's challenging economy, with increasing environmental pressures and limited External resources, the current assets and liabilities as working capital had great importance and Optimal management of working capital of firms considered as a Competitive advantage for them. The main axis of this research was how development of working capital management influences on profitability and liquidity as two important factors of financial performance. This paper was an analytical - descriptive research that reviews the existing literature in this field and classifies them into two groups including the impact of working capital strategies on the performance and the other one was the impact of working capital indicators on the performance. This survey investigated the relationship between working capital strategies and working capital indicators with the performance of organization. The survey result showed that the impact of working capital strategies and indicators on profitability and liquidity considered simultaneously in development of working capital management.

Keywords: Working capital; aggressive strategy; conservative strategy; profitability; liquidity