Abstract:
Abstract
The working capital management plays an important role for success or failure of a company because its effect company’s profitability as well as its liquidity. The thesis is based on secondary data collected from Abbarci Petroleum Company, for the period of (2006-2010) in order to investigate the relationship existing between profitability, and the working capital management for Abbarci Petroleum Company. To investigate this relationship, Statistical and Correlation analysis have been used. The finding shows:
1. APP has significant positive relationship with the profitability, which means that when the time lag between Companies purchases material paying suppliers bill increases, the operation profit also increases; the company may invest that money in somewhere else in order to generate profit. This implies that, with holding the payment Abbarci company can takes the advantage of cash available for its working capital needs
2. There is a significant negative relation between CCC and the profitability of Abbarci, measured through (operation profit), this means that as the cash conversion cycle increases, it will lead to declining of profitability of a company. Therefore, the managers can generate profitability for their company by handling the adequate CCC and keeping each different component to an optimum level.
3. There is significant positive relationship between liquidity and profitability at the end we can conclude that WCM has a great effect on the profitability of the company.
3. There is significant positive relationship between liquidity and profitability. this mean When a conservative strategy is used and current assets are maintained more than optimal level of WC or current liabilities are created less than the optimal level of WC, companies incur more operational costs (such as storage costs, costs of Outstanding cash and etc.) and accordingly profitability is decreased that it shows the low efficiency of management in using existing resources to acquire profitability.
Therefore, in order to enhance the profitability of the company, mangers should reduce the cash conversion cycle by:
1. Reducing the amount of time that goods are held in inventory.
2. Collecting account receivables more quickly.
3. Paying its bills more slowly.
