THE EFFECTS OF WORKING CAPITAL MANAGEMENT ON COMPANY PROFITABILITY: EVIDENCE FROM SRI LANKAN LISTED COMPANIES

The purpose of this study is to investigate the relationship between working capital management and firm profitability and also to evaluate the impacts of working capital components on firm’s profitability. ICP, DCP, CCP and CCC are used as measure of working capital management. This study is used panel data of 47 firms, year for the period of 2008-2011 that consist of six different business sectors which are listed in Colombo stock exchange. In order to find out the results of this study, the researcher has used Correlations and regression analysis. The researcher also has used some variables in this study such as Gross profit ratio, Net profit ratio, Return on Assets and Return on equity as dependent variables (profitability). The coefficient and Correlations results showed there is a significant positive relationship between working capital components and Gross profit ratio and Net profit ratio. But, the results of the study provide evidence that the working capital management is not significantly correlated with ROE and ROA as the performance measures.