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A Theoretical Review on the Relationship between Working Capital Management and Company's Performance

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  • Artor Nuhiu

    (University of Prishtina)

  • Arben Dërmaku

    (University of Prishtina)

Abstract

The purpose of this paper is to elaborate the relationship between working capital management (WCM) and company’s performance as well as related determinant factors based on literature review. It aims to identify gaps in the current body of knowledge which justify future research directions. Working capital management has attracted serious research attention in the recent past, and has become a hot topic since the financial crisis of 2008. Working capital management is a topic that has been well-known in science as well as in business practice for a long time. At the same time, its presence in the literature is still comparatively low, concentrating on the analysis of the link between WCM and company’s performance with the help of publicly available data and key ratios from the annual financial statements. Especially, in view of the growing volatility and uncertainties in the credit and financial markets that have been observed for a number of years and the corresponding increase in regulatory capital in the area of external capital raising, the company's focus increasingly shifts to internal liquidity generation from the operating business on the structure of working capital. However, in order to take account of this increased interest, a stronger focus on qualitative empirical investigations is necessary from a scientific point of view, which has so far only been sparsely represented in the literature. Besides this, the review of empirical studies explore the avenue for future and present research efforts related to the subject matter.

Suggested Citation

  • Artor Nuhiu & Arben Dërmaku, 2017. "A Theoretical Review on the Relationship between Working Capital Management and Company's Performance," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 13(3), pages 56-69, JUNE.
    • Handle: RePEc:dug:actaec:y:2017:i:3:p:56-69
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    References listed on IDEAS

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    1. Pedro Juan García‐Teruel & Pedro Martínez‐Solano, 2007. "Effects of working capital management on SME profitability," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 3(2), pages 164-177, April.
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    2. Onyemenam, Chinedu Micheal & Okwo, Mary Ifeoma & Eze, Charles Uzodinma, 2023. "Free Cash Flow Activities and Financial Performance of Listed Pharmaceutical Firms in Nigeria," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 10(9), pages 109-121, September.

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