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Empirical Analysis of Working Capital Behavior: The Case of the Polish Food Manufacturing Industry

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  • Dorota Czerwinska-Kayzer
  • Joanna Florek

Abstract

Purpose: The purpose of this paper was to present and compare the duration of the cash conversion cycle and its components in food manufacturing sector industries. In turn, the utilitarian objective was defined as specifying the intervals for average working capital cycles in these industries. Design/Methodology/Approach: The proposition of how to determine the average time intervals of the cash conversion cycle and its components in food manufacturing sector industries was focused on identifying the time intervals needed for each working capital component to move from the expenditure stage to cash inflow. For every industry, the average values were determined based on their variation which, in turn, was calculated using their medians and quartile deviations recorded over the 15-year study period. Findings: Irrespective of the situation they find themselves in, enterprise managers usually focus on managing their working capital. Adequate management of its components ensures financial stability for the enterprise because they have a direct impact on liquidity, profitability and solvability. This study confirmed that the duration of the cash conversion cycle, including its sub-cycles, differs significantly between enterprise groups covered by the analysis. It depends on the type of activity and is inherent to each industry. Knowing the days sales of inventory (DSI), days sales outstanding (DSO) and days payable outstanding (DPO) in enterprises with a similar business profile contributes to efficient management in these areas. Therefore, the average DSI, DSO and DPO values determined in this paper may serve as benchmarks in financial assessments. Practical implications: Calculating the average values of indexes that account for industry differences provides a new, streamlined tool for assessing and managing each component of working capital. Monitoring the cash conversion cycle and its components and comparing them to average values will help control the business and quickly identify potential problems. In undesirable situations, this approach also provides a more efficient way to develop emergency plans and recovery measures. Originality/value: The calculated intervals of the average cash conversion cycle and conversion cycles for each component of working capital (inventory, accounts receivable, and accounts payable) take into account the particularities of different branches in the food industry. Consequently, companies can use these intervals to benchmark their financial situation or when preparing plans for ongoing actions or corrective measures.

Suggested Citation

  • Dorota Czerwinska-Kayzer & Joanna Florek, 2025. "Empirical Analysis of Working Capital Behavior: The Case of the Polish Food Manufacturing Industry," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 885-906.
    • Handle: RePEc:ers:journl:v:xxviii:y:2025:i:2:p:885-906
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    References listed on IDEAS

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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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