Different Working Capital Polices and the Profitability of a Firm

Abstract

This study examines if there is a difference between the profitability of Jordanian industrial companies which have a low cash conversion cycle and the profitability of those which have a high cash conversion cycle. Moreover, eight indexes have been developed to help the investor and the manager of the company in Jordan to make their decisions. To achieve the objectives of the study, a sample of 45 Jordanian industrial companies listed at Amman Stock Exchange were studied. The study covered the period from 2000 to 2007. T-Tests and Mann-Whitney-U Tests were used to test the four hypotheses of the study. It was concluded that there was a statistically significant difference among the companies that have a high cash conversion cycle and those which have a low cash conversion cycle. Eight indexes of performance differed between companies with high cash conversion cycles and companies with low cash conversion cycles.