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How does profitability get affected by working capital management in food and beverages industry?

Thapa, Priya Darshini Pun (2013): How does profitability get affected by working capital management in food and beverages industry?

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Abstract

This study examines the working capital management of the Food and Beverage Corporations from the U.S.A. and Canada during the 10 years study period from year 2000 to 2009. Firstly, unlike previous studies which advocate a linear relationship between the working capital management and profitability, it investigates the existence of a possible non-linear relationship. Secondly, the efficiency of working capital management was checked using performance index, utilization index and efficiency index rather than using the conventional turnover ratios. Thirdly, the distribution of working capital measure i.e. cash conversion cycle and factors affecting viz. leverage, growth, size, age, cash flow and fixed assets to total assets ratio has been studied. The results suggest the existence of concave relationship between the working capital management and profitability. The findings also revealed that the corporations were efficient during the study period.

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