The Relationship between Working Capital Management Efficiency and EBIT
AbstractThis paper is aimed at analyzing the relationship between Working Capital Management Efficiency (WCME) and Earnings before Interest&Taxes (EBIT) of the Paper Industry in India during 1997–1998 to 2005–2006. Tomeasure the WCME three index values viz., Performance Index (PI), Utilization Index (UI), and Efficiency Index (EI) are computed, and are associated with explanatory variables, viz., Cash Conversion Cycle (CCC), Accounts Payable Days (APDAYS), Accounts Receivables Days (ARDAYS), Inventory Days (INVDAYS). Further, Fixed Financial Assets Ratio (FIXDFARA), Financial Debt Ratio (FINDBTRA) and Size (Natural log of Sales) are considered as control variables in the analysis, and are associated with the EBIT. The study reveals that the Paper Industry has managed the WC satisfactorily. The APDAYS has a significant (–)ve relationship with EBIT, which indicates that by deploying payment to suppliers they improve the EBIT. The Paper Industry in India performs remarkably well during the period, however, less profitable firms wait longer to pay their bills, and pursue a decrease in CCC.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by University of Primorska, Faculty of Management Koper in its journal Managing Global Transitions.
Volume (Year): 7 (2009)
Issue (Month): 1 ()
Find related papers by JEL classification:
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Julia Koralun-Bereźnicka, 2011. "Country and industry factors as determinants of corporate financial liquidity in the European Union countries," Bank i Kredyt, National Bank of Poland, Economic Institute, vol. 42(1), pages 19-48.
- Godfred Adjapong Afrifa, 2013. "Working Capital Management Practices of UK SMEs: The Role of Education and Experience," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(4), pages 185-196, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alen Jezovnik).
If references are entirely missing, you can add them using this form.