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The Effect of Working Capital on Profitability: Evidence from Romania

Author

Listed:
  • Boþoc Claudiu

    (West University of Timiºoara, Faculty of Economics and Business Administration)

Abstract

The golden rule of financial equilibrium state the noncurrent resources should finance noncurrent assets and current resources should finance current assets. Managing working capital suppose to provide cash, which is indispensable for a company to run its day-by-day activities. The main aim of this paper is to test for a sample of Romanian publicly companies if working capital is managed at an optimum level, and if companies hold too much or too less cash, which obviously would affect profitability. The results suggest that in order to increase profitability managers from Romanian publicly companies could increase profitability by reducing the number of days cash conversion cycle and, as second result, companies do not hold too much cash.

Suggested Citation

  • Boþoc Claudiu, 2013. "The Effect of Working Capital on Profitability: Evidence from Romania," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 1114-1118, May.
    • Handle: RePEc:ovi:oviste:v:xii:y:2012:i:1:p:1114-1118
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    More about this item

    Keywords

    profitability; working capital; days of inventories; days of accounts receivable; days of accounts payable.;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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