The Relationship between Working Capital Management Components and Profitability: Evidence from Iran

Abstract

The purpose of this study is to investigate the relationship between working capital management components with firms’ profitability. Our sample includes 98 Iranian firms accepted at Tehran Stock Exchange (TSE) during 6 years from 2008 to 2012.This research is empirical in term of goal and is descriptive in term of methods. Required data are extracted Using the "library" method. Inventory turnover period, receivables collection period, accounts payable period and cash conversion cycle are used as criteria of working capital management and return on equity used as a measure for profitability. In this research, financial ratios are calculated using the software Excel. Eviews software is used to test the hypotheses. Research findings show that there is a significant negative relationship between measures of working capital management and corporate profitability.