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The impact of working capital management on SME profitability – evidence from Kosovo

Author

Listed:
  • Ardi Ahmeti

    (University of Prishtina, Economic Faculty Hasan Prishtina, Prishtina, Kosovo)

  • Yllka Ahmeti

    (University of Tetovo, Economic Faculty, Tetovo,North Macedonia)

  • Skender Ahmeti

    (University of Prishtina, Economic Faculty Hasan Prishtina, Prishtina, Kosovo)

Abstract

The study attempts to show the impact of working capital management on the profitability of ninety-eight Kosovo-based SMEs, primarily in the manufacturing and construction sectors. The data were obtained from the financial statements of these companies for the years 2010 through 2020, and the assumptions were verified using the Ordinary least square (OLS) method. To express SMEs profitability, return on assets (ROA) is taken as a dependent variable, while to express working capital management, independent variables are taken: the inventory turnover period (INTP), receivables collection period (TRCP), trade payable period (TPP), and cash conversion cycle (CCC). In addition, are taken four control variables (size of companies, current ratio, sustainable growth, and leverage), which are not a variable of interest in the study but could influence the outcomes. The results reveal that SMEs increase profitability by decreasing the cash INTP and increasing TRCP, TPP, and CCC. By analyzing the effect of working capi al management on profitability in the context of SMEs in Kosovo, this research contributes new knowledge to the existing literature.

Suggested Citation

  • Ardi Ahmeti & Yllka Ahmeti & Skender Ahmeti, 2022. "The impact of working capital management on SME profitability – evidence from Kosovo," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 40(2), pages 459-478.
    • Handle: RePEc:rfe:zbefri:v:40:y:2022:i:2:p:459-478
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    References listed on IDEAS

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    More about this item

    Keywords

    profitability; working capital management; SMEs; financial statements; Kosovo;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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