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The Relationship between Working Capital Management and Profitability

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  • Nasser A. Alsulayhim

Abstract

Working capital management is an important concept that could influence companies in many ways. An efficient management of working capital can help a company to manage its finances and increases its profitability. This study investigates the relationship between working capital management and profitability in non-financial companies listed in the Saudi Stock Exchange. A sample of 67 companies is used for a period of ten years (2007-2016). Quantitative method using multiple linear regression and pooled data set is used for analysis. The results indicate a positive relationship between working capital management and profitability. However, each company could have a different optimal level of working capital and could require different strategies to increase profitability. This study is limited to non-financial companies listed in the Saudi Stock Exchange. This study is a positive contribution to working capital management literature as it uses a relatively large sample, a longer time period, and multiple profitability proxies in the context of Saudi Arabia which has few researches in this area.

Suggested Citation

  • Nasser A. Alsulayhim, 2019. "The Relationship between Working Capital Management and Profitability," International Business Research, Canadian Center of Science and Education, vol. 12(8), pages 142-152, August.
    • Handle: RePEc:ibn:ibrjnl:v:12:y:2019:i:8:p:142-152
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    References listed on IDEAS

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    Cited by:

    1. Abdul Rahman Shaik & Anis Ali & Ibtisam Dhuwayhi Alanazi, 2023. "Working Capital and Financial Performance in the Energy Sector of Saudi Arabia: Moderating Role of Leverage," International Journal of Energy Economics and Policy, Econjournals, vol. 13(3), pages 158-163, May.

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    More about this item

    Keywords

    working capital management; WCM; non-financial companies; profitability; stock exchange; Saudi Arabia;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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