The comparison of working capital and profitability in the manufacturing firms: A case study for BIST-100

The working capital is one of the most important issue in the context of the firms' activities and the profitability that results in this activity process. In this respect, the working capital constitutes the critical point that is very prominent for corcerns and paying matured debts or developing positively the activity of reapping a profit which is basic for businesses. Essentially, the main concern of the working capital is what will the optimal amount and combination of current assets be and how will they be funded. It will be expected that the profitability which is the most common indicator for observing the situation of a concern can be affected by hitting the target of an optimal level of working capital. This study, indeed, aims to examine the relationship between the working capital and the profitability. For this purpose, in the first chapter the concept and management of working capital is referred as a whole and in the light of current knowledge. In the second chapter, the working capital is examined by seperated into the sections as cash management, receivables management and inventory management which are the parts of that whole. The third chapter of the study is focussed both the analysis methods in the relation with the main topic and the other methods used in the methodology of the study, especially Economic Value Added (EVA) which provide more modern perspective about assessing the profitability. In the last chapter, there is the regression analysis of 120 manufacturing firms of ten years (2003-2012) operating in Turkey and trading in BIST-100. There are too many working capital variables in the literature. In this study, the liquidity ratios are used as working capital variables and the net profit margin (NPM) and economic value added (EVA) as profitability of the concerns. The results show there is a positive and significant relationship between working capital and profitability.