Effects of Working Capital Management on SMEs Profitability: Evidence from Bangladesh

4th International Conference on Business Finance and Management on 13th - 14th July 2017, in Bangkok, Thailand ISBN: 9780998900025

7 Pages Posted: 20 Dec 2017

See all articles by G. M. Wali Ullah

G. M. Wali Ullah

Independent University, Bangladesh (IUB)

M. Nazmul Islam

University of Asia Pacific; BRAC University

Irfan Bin Khair

Independent University, Bangladesh (IUB) - School of Business and Entrepreneurship

Date Written: July 14, 2017

Abstract

Working capital management (WCM) has great impact on firm’s profitability. Due to the lack of access in long term capital market, small medium enterprise (SMEs) gives more emphasis on effective use of working capital management to ensure profitability. Bangladeshi SMEs are also highly depended on WCM. In this regards this paper aims to examine the relationship between working capital management and profitability of SMEs from Bangladesh. 10 SMEs were selected for the period of 2013-2015. The effects of various variable of working capital management including Accounts Receivables (AR), Accounts Payables (AP), Inventory (INV), Cash Conversion Cycle (CCC), Size, Current Ratio, Financial Debt Ratio (FD), Asset Turnover were studied. This study indicated that AR, AP and CCC had no significant relationship with Gross Operating Profit (GOP) and Return on Asset (ROA). There was a significant relationship between INV and ROA but no significant relationship with GOP. LnS or size of the firm and FD were found as significant with both GOP and ROA. CR had a significant relationship with GOP but not the ROA. In case of A-TURN, there was strong relationship with both ROA and GOP. Significant finding of this study was that some factors working on firms WCM in other countries also works similarly in Bangladesh.

Keywords: Working Capital Management, Profitability, SME, Bangladesh

Suggested Citation

Ullah, G. M. Wali and Islam, M. Nazmul and Khair, Irfan Bin, Effects of Working Capital Management on SMEs Profitability: Evidence from Bangladesh (July 14, 2017). 4th International Conference on Business Finance and Management on 13th - 14th July 2017, in Bangkok, Thailand ISBN: 9780998900025 , Available at SSRN: https://ssrn.com/abstract=3088346

G. M. Wali Ullah

Independent University, Bangladesh (IUB) ( email )

Plot - 16, Block - B, Aftabuddin Ahmed Road
Bashundhara R/A
Dhaka, 1212
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+8801793-514567 (Phone)

M. Nazmul Islam (Contact Author)

University of Asia Pacific ( email )

Green Road.
Dhaka, 1205
Bangladesh

BRAC University ( email )

66 Mohakhali C/A
Dhaka 1212 Bangladesh
Dhaka, 1212
Bangladesh

Irfan Bin Khair

Independent University, Bangladesh (IUB) - School of Business and Entrepreneurship

Plot 16 Block B, Aftabuddin Ahmed Road Bashundhara
Bashundhara R/A
Dhaka, 1229
Bangladesh

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