WORKING CAPITAL MANAGEMENT AND FINANCIAL PERFORMANCE OF ORGANIZATIONS, EVIDENCE FROM TURKISH CAPITAL MARKETS

Abstract

This study investigates relationship between working capital management and financial performance. The study specially assessed the effects of working capital management on financial performance has been measured by analyzing each item under the working capital such as Cash management, Inventory and account Receivables. The first objective was to examine the effect of cash management on financial performance of organizations. Secondly to establish the effect of inventory management and financial performance of organizations and thirdly to determine the effect of Accounts receivables management and financial performance of organizations. The study adopted a descriptive and correlation research design based on survey where data have been obtained from 359 respondents quantitatively. Regression analysis has been applied to reveal relationship between variables. In the study working capital components are taken as independent variable while financial performance indicators have been taken as dependent variable. Firstly, according to findings, the study found that cash management had a 45.5% effect on financial performance of organizations and this is statistically significant. The standard estimate value of .70546 shows the closeness of data. The study results imply that cash management has a statistically moderate effect on financial performance of the capital markets in Turkish. Secondly the study found that inventory management affect financial performance of the selected sample by 53.8%. The study results imply that inventory management has a statistically moderate effect on financial performance of the capital markets in Turkish. Thirdly it has been found out that accounts receivables management affects financial performance of the selected Turkish capital markets by 48.4%. Based on these findings, it can be claimed that it has been found out that there is a statistically significant moderate effect of accounts iii receivables management on financial performance of organizations. Firstly, the study concludes that in order to generate financial performance by 45.5% of the study, the study conclude that cash management activities need to be developed in order to generate the financial performance of Turkish companies. Secondly the study concludes that the state of inventory management needs to be developed to enhance the performance excellence in the selected capital markets in Turkish. The findings obtained hence conclude that the inventory management is an ideal generator to the financial performance of the companies. Thirdly it has been found out that accounts receivables management affect financial performance of organizations. The state of the accounts receivables hence needs to be improved, flexibility need to be developed and enhancements need to be provided to the generation of the moderate forms of the financial performance of the selected companies in Turkish. The study recommends that for there is need for ensuring more accurate budget planning for the projects. If budgets are prepared based on more conservative figures of estimates, there would be greater consistency between actual disbursement and budget projections. Cash disbursements need to be issued on the designed policy that is appropriate for the organizational employees for the organizations. The study also recommends for the need to develop a strong inventory policy aimed at generating acceptable mechanisms for the management and control of the inventory. Finally, there is need for development of effective inventory policies necessary in enhancing the financial performance of the organizations. Financial health needs to be generated thirdly to improve their financial performance there is need to increase the leverage ratios currently present