Working Capital Management and Firm Performance of Companies in Pharmaceuticals & Chemicals Industry of Bangladesh Maliha Rabeta

Working Capital Management and Firm Performance of Companies in Pharmaceuticals & Chemicals Industry of Bangladesh

Author (s)

Maliha Rabeta

Abstract

This study has been initiated as an effort to understand working capital management practices of firms in the Pharmaceuticals and Chemicals Industry in Bangladesh. It has focused on relationship between the working capital variables and firm performance using panel data consisting of a sample of 31 firms from the Pharmaceuticals and Chemicals industry for a period of 19 years from 2000 to 2018. Various types of statistical tools such as mean, median, quartile analysis, graphs and charts and regression analysis have been used for the analyses. Fixed Effect model regression has been used based on the output of the Hausman Test. For testing the relationship between a firm’s profitability and its norms of working capital management, regression has been run considering Basic Earning Power as a dependent variable and current ratio, the cash conversion cycle, quick ratio, inventory conversion period, payable deferral period, days sales outstanding as explanatory variables. The cash cycle has a negative impact on the basic earning power which signifies that, as the cycle grows bigger the core profitability of the business reduces. The same applies for holding inventory for a longer period as it reduces core profitability. As the time to collect payment for sales increases, the core profitability of a business decreases. As companies age, they enjoy learning effects and become more efficient so positive relationship with core profitability exists. The major findings hence indicate that working capital is found to have significant impact on core profitability of firms in Pharmaceuticals and Chemicals industry.

 Keywords: Working capital, Basic earning power, Cash conversion cycle, Days Sales outstanding, Inventory conversion period, Pharmaceuticals, Chemicals, Bangladesh.

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Title: Working Capital Management and Firm Performance of Companies in Pharmaceuticals & Chemicals Industry of Bangladesh
Author: Maliha Rabeta
Journal Name: International Journal of Science and Business
Website: ijsab.com
ISSN: ISSN 2520-4750 (Online), ISSN 2521-3040 (Print)
DOI: https://doi.org/10.5281/zenodo.3959157
Media: Online
Volume: 4
Issue: 8
Acceptance Date: 19/07/2020
Date of Publication: 24/07/2020
PDF URL: https://ijsab.com/wp-content/uploads/580.pdf
Free download: Available
Page: 40-75
First Page: 40
Last Page: 75
Paper Type: Research Paper
Current Status: Published

Cite This Article:

Maliha Rabeta (2020). Working Capital Management and Firm Performance of Companies in Pharmaceuticals & Chemicals Industry of Bangladesh. International Journal of Science and Business, 4(8), 40-75. doi: https://doi.org/10.5281/zenodo.3959157

Retrieved from https://ijsab.com/wp-content/uploads/580.pdf

 

About Author (s)

Maliha Rabeta, MBA, Department of Finance, Faculty of Business Studies, University of Dhaka, Bangladesh.

 

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DOI: https://doi.org/10.5281/zenodo.3959157

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