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Working capital management and its impact on Enterprise Performance: An Empirical Analysis of Ethiopian exporters

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Document pages: 10 pages

Abstract: The company may have the best level of working capital to maximize value through effective management of current liabilities and assets. Previously, a large number of studies have been conducted on the impact of working capital management on the company s performance in different industries; However, its impact on the performance of companies engaged in export activities has not been considered. This special study attempts to investigate the fundamental impact of working capital management on the performance of Ethiopian export companies. In order to analyze this specific study, a total of 164 exporters operating in Ethiopia were selected as samples, and the primary and secondary data collection methods were used. Data collected from the study samples were usedultiple linear regression model and the result reveals that working capital management which was measured by account receivables period, cash conversion cycle, and accounts payable period has a statistically significant and positive correlation with the performance of exporting firms in Ethiopia which was measured by both return on assets and return on investment. However, working capital management which was measured by the inventory conversion period has a statistically significant and positive impact on return on investment, but it has an insignificant impact on the performance of sampled export firms in Ethiopia which was measured by return on assets. Based on the result of the study, firms may need to extend credit terms for customers, may prolong their cash conversion cycle, may need an extended payment period, and may or may not hold a high volume of inventory. All extending periods and cycles shall be made up to the extent of attaining an optimal level of working capital and better to implement a conservative policy of working capital management. Thus, it is advisable to consider the result of this study while making decisions regarding their working capital management to support their performance.

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