The study of the effect of the working capital policies on the risk and the performance (profitability) of the enterprises

Abstract

The main objective of this study is to investigate the effects of the conservative working capital policies on the profitability and risk of the accepted enterprises in Tehran Stock Exchange. The importance of the working capital management and the effect of the present policies in the working capital management scope, and its effects on the profitability and the risk of the enterprises are proven, but these issues are rarely taken into consideration. One of the most important management discussions in a business enterprise (profit organization), is the management of its working capital, because it directly affects the profitability and liquidity of the business enterprise. The management of the working capital is divided into two groups, namely the management of the current assets and the management of the current liabilities. The management of the working capital includes the planning and controlling the current assets and liabilities, in such a way that by removing the risk results from inability in payment of the short term commitments on the one hand, and by avoiding from extensive investments in these assets on the other hand, makes an equilibrium between the risk and the profitability and makes more profit for the business enterprise. Although the management of the working capital has a significant role in the profitability of the business enterprise, but up to now, rare studies have been conducted in this field on the Iranian enterprises. The present study seeks to investigate the relation between the conservative working capital policies and the profitability and the risk of the enterprises.