Literature Review Of Working Capital Management

Literature Review Of Working Capital Management-46
While lower investment in the working capital expressed as aggressive working capital policy is associated with higher returns and higher risk, more investment in the working capital expressed as conservative working capital policy is associated with lower return and lower risk [14].

While lower investment in the working capital expressed as aggressive working capital policy is associated with higher returns and higher risk, more investment in the working capital expressed as conservative working capital policy is associated with lower return and lower risk [14].

A firm can collect its receivables in a short time and restrict credit sales to reduce account receivables and increase cash inflows.

However, rigid sales policies and low credit sales would lead to loss of sales, thus causing profits to fall [6].

This study, which investigates the impact of the WCM on the profitability of Turkish industrial firms, is considered to contribute on the determination of working capital investment levels of these firms, determination of the distribution among the working capital components, effective use of scarce resources, and resource supply and sustainability of future investments by applying a working capital that will increase the profitability.

There are a number of studies covering the developed countries in the literature, while there are limited studies covering the emerging countries.

According to the World Bank data, the industry sector’s share in GDP is 32% [2].

The share of the industry sector in exports is around 92% [4].Global economic integration for developing countries through economic liberalization and democratization is accepted as the best way to overcome destitution and discrimination [1].At this point, the industry sector plays a significant role.In this case, the industry sector will remain important for the Turkish economy in the future.The industry sector, which plays a key role in the Turkish economy, is faced with many problems such as lack of qualified workforce, inadequacy of infrastructure and technology, weak competition power, and difficulties in marketing and financing.Working capital management is concerned with the day-to-day activities rather than long-term investment decisions [7].Working capital is a part of firm’s current assets, which are converted into cash within a year or less [8].In this sense, working capital components (WCC) are cash, cash equivalents, inventories, accounts receivables, and accounts payables.Investment in the working capital components is important for all industrial enterprises to be powerful financially.In this context, firms that invest heavily in inventory and accounts receivables may be exposed to low profits [11].Another component that has an impact on the working capital requirement is accounts payables.

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