Working Capital Management Roles for Multinational Retail Industry Profitability: A Qualitative Study, Worldwide Perspective

Authors

Abdulhadi Ramadan, Department of Accounting, King Talal School of Business Technology, Princess Sumaya University for Technology, Amman 11941, JordanDepartment of Accounting, King Talal School of Business Technology, Princess Sumaya University for Technology, Amman 11941, JordanFollow
Amer Morshed, Department of Financial and Accounting Science, Faculty of Business, Middle East University, Amman 11831, JordanFollow

Abstract

In this study, we explored efficient working capital management strategies for profitability in the retail industry. Analyzing indicators of effective working capital management using qualitative research involved online interviews with 37 financial managers from multinational retail companies. The study found that retailers often adopt aggressive working capital financing policies due to negative cash conversion cycles and low current ratios. Effective cash flow management involves expediting inventory turnover and delaying accounts payable. Positive supplier relationships and market awareness contribute to profitability. Indicators of effective working capital management include inventory turnover, receivable and payable turnovers, liquidity ratios, and the cash conversion cycle. Maintaining higher payable turnover days than receivable turnover days is recommended. Retailers should aim for a current ratio of at least one and improve the cash conversion cycle through efficient inventory management. This study provided specific strategies for efficient working capital management in retail, filling a research gap. The findings offered valuable insights for financial managers to optimize working capital and enhance profitability. The study recommends that retail companies should adopt aggressive working capital financing policies, focus on efficient inventory management, maintain positive supplier relationships, and stay informed about market conditions to achieve effective working capital management and maximize profitability.

Recommended Citation

Ramadan, Abdulhadi and Morshed, Amer (2023) "Working Capital Management Roles for Multinational Retail Industry Profitability: A Qualitative Study, Worldwide Perspective," Information Sciences Letters: Vol. 12 : Iss. 10 , PP -.
Available at: https://digitalcommons.aaru.edu.jo/isl/vol12/iss10/19