When determining a WCM policy, a firm has to consider both sides of the coin and try to find the right balance between risk and return. An overall view on the results of the relation between the number of days accounts receivables and the profitability of a firm during the non-crisis period, gives a reasonable indication of the management of accounts receivables during the non-crisis period. Unpublished working paper, Harvard Business School. Studies on working capital management The number of days accounts receivables, inventories and accounts payables are used as the operationalization of the management of trade credit and inventory. Furthermore these periods are then compared and then determined, whether companies have to alter their management concerning their working capital management during times of a crisis.

Since any theory is not stating otherwise, this is still expected to be kept as minimal as possible during a crisis. Later, the results of the most influential articles on trade credit motives are discussed. What can be concluded in the above discussion is that financially constraint firms, either large or small, increase the use of trade credit to substitute the non-accessible bank loans. They argue that this phenomenon may be attributed to the inconsistent and volatile economic conditions of Pakistan. Lending Channels and Financial Shocks: This contradicting evidence should not be taken that hard, because it is based on the accounts receivables of 31st of December of and

The highest VIF score was 2. Short-term debt Loans that have maturities of shorter than one year. A method that will enable this analyses, is using lead variables in the upcoming regression analyses.

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The question of whether companies in the U. The control variable sales growth shows a positive relation on the dependent variables, which is consistent with the articles DeloofShin and SoenenFalope and AjiloreKaraduman et al.


excellent master thesis utwente

In the next chapter the hypotheses will be developed, using the expectations based on the different theories and studies concerning working capital management. Acadamic and business relevance The literature on working capital management is limited to non-crisis period. He argued that companies increase their inventory levels to reduce the cost of possible production stoppages and the possibility of no access to raw materials and other products.

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Then on basis of this information the best way of managing working capital is masteer for both periods. As mentioned earlier in this paper trade credit can either be accounts payables or accounts receivables, but what of the other part of WCM, inventory management. This optimal way is defined in this study as the most profitable way, so the most optimal way of managing working utwentd in this study is leading to the highest profitability of a firm.

This is likely to be caused by the fact that they study large firms listed on the New York Stock Exchange. The bank lending theory predicts that during monetary contractions banks restrict some loans extended to firms Nilsen, He also found that suppliers have an advantage in financing high-risk customers, but only in certain circumstances. thssis

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The working capital policies during the non-crisis period of and during the Financial Crisis of and are compared. Evidence from trade credit. According to Padachi et al. Misra University of Twente. While WCM focuses mainly on the short-term financing and short-term investment decisions utwene firms Sharma and Kumar, Journal of Financial Economics,pp.

Therefore the analyses of the relative longer term effect is vital for the understanding of the management of accounts receivables during crisis periods. Lazaridis and Tryfonidis studied utwdnte relation between working capital management and corporate profitability in Greece.


The question of whether companies in the U. But this policy is criticised by Wang Because of these constraints, financially constraint firms have to look at alternative sources for their financial needs.

The above discussed working capital and the cycle that it forms is managed by what is called Working Capital Management WCM. This internship was supervised by Prof. Also limitations are caused by the fact that only one crisis period, the financial crisis ofis used.

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Firms are thus better off keeping their inventory level to a reasonable minimum. Another reason is that firms who pay their bills earlier receive a discount, which in turn affects profitability. With the dependent variable ROA the percentage is Fixed Financial Assets The last control variable that will be used is the Fixed Financial Asset ratio and is calculated by dividing fixed financial assets with total assets.

This is caused by the fact that future sales of this customer are saved this way.

There are two ways of implementing this price discrimination to firms. Other reasons for not using accounts payables is the possible loss of goodwill when firms do use their accounts payables and thus paying later. Unpublished working paper, Harvard Business School.