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Working Capital Management and Firm Profitability in the Textile Industry of Bangladesh

Author

Listed:
  • Muhammad Matin Khan

    (Department of Finance, University of Dhaka, Bangladesh)

  • Md. Ismail Hossain Shagor

    (Department of Finance, University of Dhaka, Bangladesh)

  • Abu Kalam

    (Department of Finance, University of Dhaka, Bangladesh)

  • Md. Sojib Ahmed

    (Department of Finance, University of Dhaka, Bangladesh)

Abstract

This paper has been conducted to examine the connection between working capital management measured and profitability performance is measured. The study is conducted based on secondary data from annual reports of respective textile firms listed in DSE and DSE monthly reviews. From 2000 to 2018. The objective of the study is to find out the working capital devoted to the firms registered in the Dhaka stock exchange and find the connection of their performance and working capital capitalized in registered textile firms in DSE. To address this panel data, besides ratio and quartile study, Hausman test, variance inflation test, and fixed effect regression was done for testing all the hypotheses and the study result shows the inverse association with age and payment deferred period but a positive association with fixed asset turnover, cash conversion cycle, days sales outstanding, inventory conversion period, sponsor shareholdings and total assets. It also suggests to produce an effective policy must be produced for each company for each component of working capital. Besides, well-organized management and financing of working capital can upsurge the operating profit of a textile firm. Shorter cash conversion cycle, days sales outstanding, and the inventory conversion period can increase firms’ profit. These are some practical examples of working capital management.

Suggested Citation

  • Muhammad Matin Khan & Md. Ismail Hossain Shagor & Abu Kalam & Md. Sojib Ahmed, 2020. "Working Capital Management and Firm Profitability in the Textile Industry of Bangladesh," International Journal of Science and Business, IJSAB International, vol. 4(7), pages 118-127.
    • Handle: RePEc:aif:journl:v:4:y:2020:i:7:p:118-127
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    References listed on IDEAS

    as
    1. Sin Huei Ng & Chen Ye & Tze San Ong & Boon Heng Teh, 2017. "The Impact of Working Capital Management on Firm's Profitability: Evidence from Malaysian Listed Manufacturing Firms," International Journal of Economics and Financial Issues, Econjournals, vol. 7(3), pages 662-670.
    2. Turki Alshammari, 2018. "Performance Effects of Working Capital in Emerging Markets," International Journal of Economics and Financial Issues, Econjournals, vol. 8(5), pages 80-87.
    3. Shahid Ali, 2011. "Working Capital Management and the Profitability of the Manufacturing Sector: A Case Study of Pakistan’s Textile Industry," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(2), pages 141-178, Jul-Dec.
    4. Nitya Nand Tripathi & Naseem Ahamed, 2017. "Time Taken to Reach the Performance Summit: Nature of Relation Between Working Capital Management and Firm Performance in the Indian Context," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 530-536.
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    Cited by:

    1. Ardi Ahmeti & Alban Elshani, 2024. "The Effect of Profitability as a Mediator in the Relationship between Working Capital Management and the Sustainable Growth of Small and Medium-Sized Enterprises in Selected Western Balkan Countries," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 7, pages 47-61.
    2. Tarik Hossain, 2020. "The effect of working capital management on profitability: A study on manufacturing companies in Bangladesh," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 9(6), pages 114-122, October.

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