Role of Working Capital Management in Achieving Financial Performance
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Abstract
The paper identifies various components of both Working Capital Management and Financial Performance. It also attempts to see if there is link conceptually between components of Working Capital Management and that of Financial Performance. The study found that Working Capital Management has Cash Conversion Cycle (CCC), Day Sales Outstanding (DSO), Day Inventory Outstanding (DIO) and Day Payables Outstanding (DPO) as components while Financial Performance has Return on Assets (ROA), Return on Equity(ROE), Return on Capital Employed(ROCE) etc as components. The study also finds how to quantitatively measure each component and various conceptual relationship between components of Working Capital Management and that of Financial Performance. The study therefore, concludes that having the right components mix will improve Financial Performance. It is therefore recommended empirical study need to be carried out as more data emerges in different sector of the economy.
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