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Working Capital Management Insights

Working capital management (WCM) is essential for a firm's short-term financial health and profitability, particularly in the consumer foods sector where inventory levels and demand fluctuations are critical. Firm characteristics such as size, profitability, leverage, and growth opportunities significantly influence WCM strategies. This chapter reviews literature on WCM and firm characteristics, identifying research gaps to support further study.

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Chukwuma Sampson
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25 views2 pages

Working Capital Management Insights

Working capital management (WCM) is essential for a firm's short-term financial health and profitability, particularly in the consumer foods sector where inventory levels and demand fluctuations are critical. Firm characteristics such as size, profitability, leverage, and growth opportunities significantly influence WCM strategies. This chapter reviews literature on WCM and firm characteristics, identifying research gaps to support further study.

Uploaded by

Chukwuma Sampson
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Working capital management (WCM) is a critical component of corporate financial management

that influences a firm's short-term financial health, liquidity, and overall profitability. Efficient

WCM ensures that a company maintains a proper balance between its current assets and current

liabilities, optimizing cash flow and reducing financial risks (Banos-Caballero, Garcia-Teruel, &

Martinez-Solano, 2022). In the consumer foods sector, effective WCM is particularly important

due to the nature of the industry, which requires maintaining substantial inventory levels,

managing fluctuating demand, and dealing with short product life cycles (Ademola, Akinsulire,

& Fapetu, 2023).

Firm characteristics such as size, profitability, leverage, and growth opportunities significantly

affect how companies manage their working capital. Larger firms may have better access to

financing and economies of scale, while smaller firms often struggle with financial constraints

(Nazir, Ullah, & Anwar, 2023). Similarly, profitability influences WCM policies, as firms with

higher profits can afford aggressive working capital strategies, whereas less profitable firms may

prioritize liquidity preservation (Bui, Pham, & Tran, 2022). Leverage and growth opportunities

also play crucial roles in shaping WCM decisions, as firms with high debt levels must balance

liquidity management with debt servicing, while growing firms require efficient working capital

to sustain expansion (Adebayo, Balogun, & Oluwaseun, 2023).


This chapter reviews relevant literature on WCM and firm characteristics, including conceptual

discussions, theoretical perspectives, and empirical studies. It also identifies gaps in existing

research to establish the foundation for this study.

Refernce

Enqvist, J., Graham, M., & Nikkinen, J. (2020). Working capital management and firm profitability:
Evidence from an emerging market. Research in International Business and Finance, 51, 101083.
[Link]

Nguyen, H. T. (2020). The impact of firm characteristics on working capital management: Evidence from
Vietnam. Journal of Asian Finance, Economics and Business, 7(2), 211–220.
[Link]

Enqvist, J., Graham, M., & Nikkinen, J. (2020). Working capital management and firm profitability:
Evidence from an emerging market. Research in International Business and Finance, 51, 101083.
[Link]

Aktas, N., Croci, E., & Petmezas, D. (2015). Is working capital management value-enhancing? Evidence
from firm performance and investments. Journal of Corporate Finance, 30, 98–113.
[Link]

 Nguyen, H. T. (2020). The impact of firm characteristics on working capital management:


Evidence from Vietnam. Journal of Asian Finance, Economics and Business, 7(2), 211–220.
[Link]

 Wanke, P., Bekun, F. V., & Kaizer, A. (2021). Determinants of working capital management
in Africa: Evidence from the consumer goods sector. Journal of Economic and Administrative
Sciences, 38(2), 129–145. [Link]

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