Name: R. Logambal, G. Kanagasabapathy & S. Parthiban
Country: India

Year: 2026
Volume: Volume No: 13, Issue No: 1, Year: 2026
Page Number: 39-44
DOI: https://doi.org/10.5281/zenodo.18934959

ABSTRACT
Working capital management plays a crucial role in determining the liquidity and profitability of firms. This study examines the relationship between working capital management and firm profitability using panel data from manufacturing firms. Profitability is measured using return on assets (ROA), return on equity (ROE), and net profit margin (NPM). The key working capital variables include average age of inventory (AAI), average accounts receivable (AAR), and average accounts payable (AAP). Firm size (SIZE), sales growth (SG), and working capital financing (WCF) are included as control variables. Panel regression techniques including ordinary least squares (OLS), fixed effects (FE), and random effects (RE) models are used to estimate the relationships. The empirical findings indicate that longer receivable and payable periods reduce profitability due to delayed cash inflows and inefficient credit
management, while sales growth positively affects firm performance. The findings highlight the importance of efficient working capital policies for improving financial performance in manufacturing firms.

Keywords: Working capital management, profitability, manufacturing firms, panel data
analysis