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Impact of working capital management on profitability: evidence from listed companies in Qatar

Author

Listed:
  • Maad A. Q. Aldubhani
  • Jitian Wang
  • Tingting Gong
  • Ramzi Ali Maudhah

Abstract

Purpose - This study aimed to find out whether working capital management policies affect the profitability of manufacturing companies listed on the Qatar Stock Exchange. Design/methodology/approach - To assess the working capital management and profitability relationship, the authors applied a multiple regression analysis methodology in all manufacturing companies listed on the Qatar Stock Exchange (ten firms) between 2015 and 2019. Average collection period, inventory turnover, average payment period and cash conversion cycle were adopted as proxies for working capital management, and profitability was measured by operating profit margin (OPM), return on assets (ROA), return on capital employed (ROCE) and return on equity (ROE). Findings - The study found that companies with shorter receivables collection periods and cash conversion cycles are more profitable. Longer inventory turnover periods and accounts payable payment periods are related to higher profitability of the firms. Originality/value - Previous studies have assessed the relationship between working capital management and profitability. However, this study is the first one to use these four variables combined (OPM, ROA, ROCE and ROE) to measure profitability; this is what was limited in previous studies. In comparison, the previous studies were not comprehensive in studying the impact of working capital management on profitability from all aspects of profitability's variables [operational (OPM), economic (ROA), capitalist (ROCE) and financial (ROE)]. However, this study focused on all these aspects to make the results of the study more accurate. Also, it is worth mentioning that this study is the first research performed on Qatar Stock Exchange, although Qatar has achieved remarkable progress in the industrial sector in recent years, making it one of the first industrialized countries in the Middle East.

Suggested Citation

  • Maad A. Q. Aldubhani & Jitian Wang & Tingting Gong & Ramzi Ali Maudhah, 2022. "Impact of working capital management on profitability: evidence from listed companies in Qatar," Journal of Money and Business, Emerald Group Publishing Limited, vol. 2(1), pages 70-81, March.
  • Handle: RePEc:eme:jmbpps:jmb-08-2021-0032
    DOI: 10.1108/JMB-08-2021-0032
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    Citations

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    Cited by:

    1. Ibrahim Shuayb Kademi & Norhayati Alias & Noor Hasniza Haron & Raziah Bi Mohamed Sadique, 2024. "Working Capital Management and Financial Performance: Evidence from Nigeria’s Public Listed Manufacturing Companies," Accounting and Finance Research, Sciedu Press, vol. 13(2), pages 142-142, May.
    2. Tarek Eldomiaty & Nourhan Eid & Farida Taman & Mohamed Rashwan, 2023. "An Assessment of the Benefits of Optimizing Working Capital and Profitability: Perspectives from DJIA30 and NASDAQ100," JRFM, MDPI, vol. 16(5), pages 1-19, May.
    3. Swastika GAYEN & Jaybhushan MAHALLE & Vishwajit HARISH & Taniya MALIK, 2023. "Beyond the Balance Sheet: Dissecting the Impact of WCM on Profitability in India’s Business Arena," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 4(11), pages 66-76, November.
    4. Gupta, Deepika & Pandey, Asheesh, 2024. "Analyzing impact of corporate governance index on working capital management through fractal functions," Chaos, Solitons & Fractals, Elsevier, vol. 183(C).
    5. Muhammad Amin Hasan & Ali Sajid & Aman Abbas Ghouri & Talal Ahmed Khan, 2023. "Re-Examining Working Capital Management and Firm Performance Nexus: Does Investment Policy Matter?," Journal of Economic Impact, Science Impact Publishers, vol. 5(3), pages 269-278.
    6. Kansilembo Aliamutu & Msizi Mkhize, 2024. "The Impact of Value Chain Financing on Profitability for South Africa's Edible Oil Manufacturing Companies: Raw Materials and Working Capital Approaches," Journal of Economics and Behavioral Studies, AMH International, vol. 16(1), pages 31-40.

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