The effect of working capital management on profitability: The case of Small Medium and Micro Enterprises in South Africa
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Date
2014
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Danubius Journals Platform
Abstract
Working capital is vital in any business, especially in SMMEs, given that most of their assets are in the form
of current assets. Management of working capital is vital in order to improve profitability of the business. This study
investigated the effect working capital management on profitability, using fifteen South African SMMEs, listed on the Alt-X
on the JSE, from 2008-2012, using a multiple regression analysis. The results show a positive relationship between number
of days account receivable, number of day’s inventory and negative relationship between number of days payable and cash
convention cycle. Thus minimizing working capital and decreasing the cash conversion cycle increases profitability and
hence shareholder value.
Description
Keywords
Working capital, Cash conversion cycle, SMMEs, Profitability
Citation
Enow, S.T. & Brijlal, P. (2014). The effect of working capital management on profitability: The case of Small Medium and Micro Enterprises in South Africa. Journal of Accounting and Management, 4(2): 7 - 15.