• ISSN: 2301-3567 (Print), 2972-3981 (Online)
    • Abbreviated Title: J. Econ. Bus. Manag.
    • Frequency: Quarterly
    • DOI: 10.18178/JOEBM
    • Editor-in-Chief: Prof. Eunjin Hwang
    • Executive Editor: Ms. Fiona Chu
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    • E-mail: joebm.editor@gmail.com
HOME > Archive > 2018 > Volume 6 Number 1 (Feb. 2018) >
JOEBM 2018 Vol.6(1): 27-35 ISSN: 2301-3567
DOI: 10.18178/joebm.2018.6.1.546

Impact of Working Capital Management on Profitability: A Case Study on Pharmaceutical Companies of Bangladesh

Ahm Yeaseen Chowdhury, Mohammad Zahedul Alam, Sabiha Sultana, and Md. Kaysher Hamid

Abstract— This study is a modest endeavor to find out the effects of working capital management (WCM) on the profitability of pharmaceutical companies in Bangladesh. 9 pharmaceutical companies listed with Dhaka Stock Exchange (DSE) have been selected for the period of 2001-15. Return on asset (ROA), return of equity (ROE) and earning per share (EPS) have been used as the measures of profitability and average collection period (ACP), average payment period (APP), inventory conversion period (ICP), cash conversion cycle (CCC), and investment in marketable securities (INV) served as the representatives of working capital management. In correlation analysis, negative correlations are found among average collection period, inventory conversion period, cash conversion cycle, investment in marketable securities, and return on asset; inventory conversion period, cash conversion cycle, average payment period, and return of equity; and inventory conversion period, cash conversion cycle, investment in marketable securities, and earning per share. In regression analysis, at 5% significance level, significant negative relationships are observed between return on asset and average collection period, inventory conversion period, and cash conversion cycle; return of equity and average payment period; earning per share and average collection period and average payment period where significant positive relationships are seen between average payment period and return on asset; and cash conversion cycle and return of equity. Therefore, this research concludes that efficient working capital management is critical for the profitability of firms and financial managers can create value for their shareholders by implementation of effective working capital management policy.

Index Terms— Working capital management, profitability, cash conversion cycle, Bangladesh.

Ahm Yeaseen Chowdhury and Md. Kaysher Hamid are with the Finance of the Department of Business Administration-General of Bangladesh University of Professionals (BUP), Dhaka, Bangladesh (e-mail: yeaseenchy@bup.edu.bd).
Mohammad Zahedul Alam is with Marketing of the Department of Business Administration in Marketing of Bangladesh University of Professionals (BUP), Dhaka, Bangladesh.
Sabiha Sultana is with British American Tobacco Bangladesh.

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Cite: Ahm Yeaseen Chowdhury, Mohammad Zahedul Alam, Sabiha Sultana, and Md. Kaysher Hamid, " Impact of Working Capital Management on Profitability: A Case Study on Pharmaceutical Companies of Bangladesh," Journal of Economics, Business and Management vol. 6, no.1, pp. 27-35, 2018.

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