The aim of this paper is to investigate the impact of working capital management on profitability. Working capital management was measured using; average collection period, average age of inventory, average payable period and cash conversion cycle as a comprehensive measure of working capital management. Two measures of profitability were employed; return on assets and net profit margin. The sample consisted of 33 industrial companies listed on Amman stock exchange (ASE) for the period from 2013-2017. Data required was gathered manually through the annual reports publicly available on (ASE). Panel data methodology was used with eight multiple regressions to test the study hypotheses. The findings revealed that average collection period and average age of inventory have a negative and significant impact on profitability measures; this implies that managers can enhance profitability by keeping average collection period and average age on inventory at the reasonable minimum level. However, the findings found no impact of cash conversion cycle on the net profit margin. This study contributes to the literature by providing recent evidence from developing countries about the impact of working capital management on profitability.
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To cite this article: Altawalbeh, M.A.F. (2020). The Impact of Working Capital Management on Financial Performance: Evidence from Jordan, International Journal of Academic Research in Accounting, Finance and Management Sciences 10 (1): 308-315.
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