An application to measure impact of working capital management on profitability in firms in manufacture sector quoted on ISE

The purpose of this study is to investigate the relationship between working capital management and firm profitability of corporations in manufacture sector which are listed in İstanbul Stock Exchange for the period of 2000-2008. Working capital management is important part in firm financial management decision. The ability of the firm to continuously operate in longer period depends on how they deal with investment in working capital management. The optimal of working capital management could be achieved by firms that manage the trade off between profitability and liquidity. It has been seen that if a company has got over working capital, company profitability decreases or if a company has got less working capital, because of a greater risk, company can’t pay its debts. In order to analyze the effects of working capital management on the firm’s profitability, (net profit)/total asset (ROA) as measure of profitability was used as the dependent variable. With regards to the independent variables, working capital management was measured by cash conversion cycle (CCC). Regression analysis provides a negative relationship between working capital management and firm profitability. Apart from these, ANOVA analysis indicated that there is statistically a significant difference between the CCC and subsectors of the manufacturing sector.