Effect of Working Capital Management on the viability of the company : A Review in Sri Lanka on Listed Companies

The main aim of the study was to identify whether working capital management has an impact on firm’s profitability of listed companies in Sri Lanka. Descriptive statistics, Pearson’s Correlation analysis, ANOVA, and Pooled Regression analysis were employed as measures of analysis. Working capital management components and working capital policies are used as independent variables which comprised of number of days of account receivable (DAR), number of days of inventories (DI), number of days of account payables (DAP), cash conversion cycle (CCC), working capital investment polices (WCIP), and working capital financing polices (WCFP). Current ratio (CR), firm size (SIZE), sales growth (GROWTH), and Debt ratio (DR) were employed as controlled variables. Gross operating profit (GOP) and Return on assets (ROA) were used as dependent variable. In the descriptive statistics, average of DAR, DI, DAP, and CCC are 64, 63, 97, and 29 days respectively. These findings would be useful to consider on maintaining optimal working capital management components and policies to avoid corporate collapse and to maximize firm’s profitability