The impact of working capital management on Listed companies profitability in business cycles based on the output gap

Abstract

Objective: This study aims to determine the impact of working capital management on profitability in business cycles based on the output gap in companies listed inTehran stock Exchange. In this study, the combination of panel data is used. Method: For evaluating hypotheses, Factors such as Return on total Assets (ROA), Return of owner’s Equity (ROE), Return Operating profit (OP) Were applied to evaluate corporate profitability. Moreover factors such as cash conversion cycle (ccc), Inventory Turnover In Day (ITID), Average collection period (ACP), Average payment period (APP), were utilized as criteria for evaluating working capital management. The business cycle has used been to evaluate output gap In this study, 85 companies during the period 2005 to 2014 is considered as the sample. Results: The results show that the cash conversion cycle and accounts receivable collection period in boom period has a significant and negative impact on operating profit.

Keywords

• working capital management
• profitability
• business cycles