The Tacticality of Working Capital

Elizabeth N. Emongor

doi:10.18535/ijsrm/v11i11.em09

Abstract

In today's dynamic and competitive business landscape, the effective management of working capital has emerged as a critical factor for the success and sustainability of organizations. Literature review has shown that working capital management can be an effective survival tool in a tough macroeconomic environment where businesses can enhance their ability to meet short-term obligations, improve cash flow, and ultimately achieve long-term success. As businesses strive to maintain financial stability and optimize operational efficiency, tactical working capital management has taken center stage. This research sheds light on the importance of working capital management and how it affects companies. The study goes on to demonstrate that working capital management may influence the performance of a firm and therefore its strategic management can enhance business sustainability.

Keywords

working capital managementcash conversion cyclecurrent ratiocurrent assetscurrent liabilitiesinventory management

References

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[refR-1] Abuzayed, B. (2012). Working capital management and firms’ performance in emerging markets: The case of Jordan. International Journal of Managerial Finance, 8(2), 155–179. https://doi.org/10.1108/17439131211216620DOI ↗Google Scholar ↗

[refR-2] Akbar, A., Jiang, X., & Akbar, M. (2022). Do working capital management practices influence investment and financing patterns of firms? Journal of Economic and Administrative Sciences, 38(1), 91–109. https://doi.org/10.1108/JEAS-07-2019-0074DOI ↗Google Scholar ↗

[refR-3] Amponsah-Kwatiah, K., & Asiamah, M. (2021). Working capital management and profitability of listed manufacturing firms in Ghana. International Journal of Productivity and Performance Management, 70(7), 1751–1771. https://doi.org/10.1108/IJPPM-02-2020-0043DOI ↗Google Scholar ↗

[refR-4] Cooper, K. (1984). Working Capital Management and The Management of Foreign Exchange Risk. Managerial Finance, 10(2), 27–32. https://doi.org/10.1108/eb013539DOI ↗Google Scholar ↗

[refR-5] Jabbouri, I., Benrqya, Y., Satt, H., Naili, M., & Omari, K. (2023). Determinants of working capital management for emerging markets firms: Evidence from the MENA region. Journal of Economic and Administrative Sciences, ahead-of-print(ahead-of-print). https://doi.org/10.1108/JEAS-06-2022-0142DOI ↗Google Scholar ↗

[refR-6] Kabuye, F., Kato, J., Akugizibwe, I., & Bugambiro, N. (2019). Internal control systems, working capital management and financial performance of supermarkets. Cogent Business & Management, 6(1), 1573524. https://doi.org/10.1080/23311975.2019.1573524DOI ↗Google Scholar ↗

[refR-7] Le, B. (2019). Working capital management and firm’s valuation, profitability and risk. International Journal of Managerial Finance, 15(2), 191–204. https://doi.org/10.1108/IJMF-01-2018-0012DOI ↗Google Scholar ↗

[refR-8] Mutua Mathuva, D. (2014). An empirical analysis of the determinants of the cash conversion cycle in Kenyan listed non-financial firms. Journal of Accounting in Emerging Economies, 4(2), 175–196. https://doi.org/10.1108/JAEE-10-2011-0045DOI ↗Google Scholar ↗

[refR-9] Nobanee, H., Abdullatif, M., & AlHajjar, M. (2011). Cash conversion cycle and firm’s performance of Japanese firms. Asian Review of Accounting, 19(2), 147–156. https://doi.org/10.1108/13217341111181078DOI ↗Google Scholar ↗

[refR-10] Pratap Singh, H., & Kumar, S. (2014). Working capital management: A literature review andGoogle Scholar ↗

[refR-11] Ramiah, V., Zhao, Y., & Moosa, I. A. (2014). Working capital management during the global financial crisis: the Australian experience. Qualitative Research in Financial Markets, 6(3), 332-351. https://doi.org/10.1108/qrfm-09-2012-0026DOI ↗Google Scholar ↗

[refR-12] research agenda. Qualitative Research in Financial Markets, 6(2), 173–197. https://doi.org/10.1108/QRFM-04-2013-0010DOI ↗Google Scholar ↗

[refR-13] Sardo, F., & Serrasqueiro, Z. (2022). Determinants of working capital: Empirical evidence on manufacturing SMEs. Journal of Economic Studies, 49(3), 506–521. https://doi.org/10.1108/JES-10-2020-0513DOI ↗Google Scholar ↗

[refR-14] Singhania, M., & Mehta, P. (2017). Working capital management and firms’ profitability: Evidence from emerging Asian countries. South Asian Journal of Business Studies, 6(1), 80–97. https://doi.org/10.1108/SAJBS-09-2015-0060DOI ↗Google Scholar ↗

[refR-15] Talonpoika, A.-M., Kärri, T., Pirttilä, M., & Monto, S. (2016). Defined strategies for financial working capital management. International Journal of Managerial Finance, 12(3), 277–294. https://doi.org/10.1108/IJMF-11-2014-0178DOI ↗Google Scholar ↗

[refR-16] Wasiuzzaman, S. (2015). Working capital and firm value in an emerging market. International Journal of Managerial Finance, 11(1), 60–79. https://doi.org/10.1108/IJMF-01-2013-0016DOI ↗Google Scholar ↗

[refR-17] Zeidan, R., & Shapir, O. M. (2017). Cash conversion cycle and value-enhancing operations: Theory and evidence for a free lunch. Journal of Corporate Finance, 45, 203-219.Google Scholar ↗