Capital Practices
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- Date Submitted: 03/16/2011 08:12 AM
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“A STUDY ON WORKING CAPITAL PRACTICES AND ITS IMPACTS ON ORGANIZATIONAL PERFORMANCES: SRI LANKAN ELECTRICAL COMPANIES PERSPECTIVE”
Introduction
This study provides an evidence of relationship between working capital practices and organizational performances in electrical companies in Sri Lanka. The information and data for the study were gathered through questionnaire and secondary data sources of a sample of electrical companies listed on the Colombo Stock Exchange. Company size has an influence on the overall working capital policy and approach.
Background of the study
Working capital management (WCM) is the management of short-term financing requirements of a firm. This includes maintaining optimum balance of working capital components – receivables, inventory and payables – and using the cash efficiently for day-to-day operations. Optimization of working capital balance means minimizing the working capital requirements and realizing maximum possible revenues. Efficient WCM increases firms’ free cash flow, which in turn increases the firms’ growth opportunities and return to shareholders. Even though firms traditionally are focused on long term capital budgeting and capital structure, the recent trend is that many companies across different industries focus on WCM efficiency. The study gives significant evidence for working capital practices and its impacts on the organizational performance.
Many exiting research papers have found that managers spend a considerable time on day-today working of capital decisions since current assets are short-lived investments that are continually being converted into other asset types. As a result, working capital management of a company is a very sensitive area in the field of financial management. It involves the decisions about the amount and composition of current assets and the financing of these assets. The decision-making process on the level of different working capital components has become frequent,...
Introduction
This study provides an evidence of relationship between working capital practices and organizational performances in electrical companies in Sri Lanka. The information and data for the study were gathered through questionnaire and secondary data sources of a sample of electrical companies listed on the Colombo Stock Exchange. Company size has an influence on the overall working capital policy and approach.
Background of the study
Working capital management (WCM) is the management of short-term financing requirements of a firm. This includes maintaining optimum balance of working capital components – receivables, inventory and payables – and using the cash efficiently for day-to-day operations. Optimization of working capital balance means minimizing the working capital requirements and realizing maximum possible revenues. Efficient WCM increases firms’ free cash flow, which in turn increases the firms’ growth opportunities and return to shareholders. Even though firms traditionally are focused on long term capital budgeting and capital structure, the recent trend is that many companies across different industries focus on WCM efficiency. The study gives significant evidence for working capital practices and its impacts on the organizational performance.
Many exiting research papers have found that managers spend a considerable time on day-today working of capital decisions since current assets are short-lived investments that are continually being converted into other asset types. As a result, working capital management of a company is a very sensitive area in the field of financial management. It involves the decisions about the amount and composition of current assets and the financing of these assets. The decision-making process on the level of different working capital components has become frequent,...