Question

Impact of working capital management on firm's profitability in a service industry e

Answer 1

Management of short-term assets and liabilities play vital role in generating profit in business sector. In the light of that, textile sector from all over the world is also emphasizing on to maintain optimal working capital to generate more profit. Researchers and practitioners around the world have done lot of work on how to maintain working capital in optimal level. Similarly, in Bangladesh, textile sector has concentrated to ensure efficient working capital management. But inadequate research work has been done on working capital management in textile companies of Bangladesh. On this background, the objective of this study is to examine the impact of different components of working capital management on profitability of the Bangladeshi textile companies. To examine that authors have used 8 (eight) years data from the time period of 2007-2014 of 22 textile companies listed in Dhaka Stock Exchange (DSE) and logistic regression has used to analyze the data. The findings of the study showed that, there is statistically significant relationship between working capital management and profitability of the Bangladeshi textile companies. More specifically, this study revealed that Current ratio and Current liabilities to total asset has most significant impact on profitability of textile companies in Bangladesh.