Open AccessEfficiency of Working Capital Management and Profitability: Evidence from Manufacturing Firms of Nepal
Author(s) -
Pitambar Lamichhane
Publication year - 2019
Language(s) - English
Resource type - Journals
ISSN - 2091-0460
DOI - 10.3126/md.v22i2.30236
Subject(s) - profitability index , working capital , return on assets , business , debt ratio , debt , return on capital employed , monetary economics , finance , economics , microeconomics , capital formation , financial capital , profit (economics)
This paper analyzes efficiency of working capital management (EWCM) and its influence on profitability of manufacturing firms in Nepal for the fiscal year 2005/06 to 2017/18 using descriptive and causal comparative research design. Net trade cycle (NTC) is used to measure EWCM. Profitability on assets (PA) and profitability on sales (PS) are dependent variables of this study. The EWCM related variables such as Net trading cycle (NTC), current ratio (CR) and debt to assets ratio (DR) are considered as explanatory variables. Result of this paper reveals both profitability on assets and profitability on sales are inversely related with NTC which implies that lower NTC increases profitability of manufacturing firms in Nepal. Further, regression result of this paper confirms that debt to assets ratio has negative and statistically significant effect on profitability on total assets and profitability on sales. The finding of this paper concludes that less uses of debt increases the profitability of manufacturing firms in Nepal.