Impact of Working Capital on firm’s Profitability and Value

Abstract

The main purpose of my research is to studying the relationship/Association between the Working capital and Profitability/Value. The Efficient working capital is the important tool to measure the profitability of the business. This research have been done on the secondary data by understanding the result of studies that have already done. This study results shows that there is variant behavior of profitability in terms of working capital, as on some points business shows negative relation and sometimes it shows positive relation with the independent variable. It also depends on the size of the firm and the market condition as well. There is a significant relationship between working capital and profitability and value of the firm. With the better management of working capital, any firm can develop value for shareholders. This goal can be achieved by managing the components of working capital, by decreasing the number of days for accounts receivable, using the method JIT (just in time) for inventory and by using the money of Accounts payable for investment in profitable purposes. Further investment in working capital can help to increase the profitability.