Abstract:
As of late, analysts have led concentrates to explore the straight connection that may exist
between working capital administration and profitability. Some researchers have discovered a
positive linear connection between working capital administration and profitability while
others have discovered a negative straight connection between working capital and
profitability. A couple of different specialists have likewise discovered blended outcomes with
regards to the connection between working capital administration and profitability. Is it
possible that the researchers finding a positive linear connection between working capital
administration and profitability are seeing one side of a maximum quadratic curve while the
studies that found a negative straight connection are also taking a gander at the opposite side?
This study consequently looks to analyze the quadratic connection that may exist between
working capital administration and profitability and furthermore endeavor to determine the
ideal working capital policies that would guarantee greatest profitability.
Listed manufacturing companies in Ghana were the entities used for this study. The study
considered the audited annual financial statements of these entities from 2006 to 2015. The
results of the investigation revealed that there is a quadratic connection between working
capital management and profitability and that there is an optimum cash conversion cycle
period, receivables collection period, inventory turnover period and payables payment period
that would have maximum positive impact on profitability measured by net profit margin.
