Working capital and its impact on business performance

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216275%3A25410%2F19%3A39914701" target="_blank" >RIV/00216275:25410/19:39914701 - isvavai.cz</a>

Result on the web

<a href="https://hdl.handle.net/10195/74250" target="_blank" >https://hdl.handle.net/10195/74250</a>

DOI - Digital Object Identifier

—

Result language

angličtina

Original language name

Working capital and its impact on business performance

Original language description

A number of studies indicate that the decision on the level of working capital affects business performance. Managing optimal working capital brings businesses sustained reduction of working capital, improves liquidity and increases profitability through effectively managed capital. The aim of this paper is to conduct empirical research of Czech companies on the relationship between working capital and the performance of a company. An OLS model is used that can calculate quadratic regression for calculating the optimum amount of working capital. Models are created that describe the dependency of earnings on the components that determine working capital. By deriving the quadratic function of performance, an inflection point is found, indicating a theoretical net trade cycle of 134 days for Czech companies with inventory and 70 days for Czech companies with no inventory. However, there is a level of working capital at which a higher working capital begins to be negative in terms of profitability due to the additional interest expenses and, hence, the higher probability of bankruptcy and credit risk of firms. Thus, firm managers should aim to keep as close to the optimal level as possible and try to avoid deviations from it that destroy profitability.

Czech name

—

Czech description

—

Type

J_SC - Article in a specialist periodical, which is included in the SCOPUS database

CEP classification

—

OECD FORD branch

50206 - Finance

Project

—

Continuities

I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Publication year

2019

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

Scientific Papers of the University of Pardubice - Series D, Faculty of Economics and Administration

ISSN

1211-555X

e-ISSN

—

Volume of the periodical

27

Issue of the periodical within the volume

46

Country of publishing house

CZ - CZECH REPUBLIC

Number of pages

12

Pages from-to

55-66

UT code for WoS article

—

EID of the result in the Scopus database

2-s2.0-85073831363