Association between Working Capital Management Strategies and Profitability

Abstract

This study aims to examine the relationship between working capital management strategies (aggressive, moderate, conservative) and profitability. The study relied on the financial statements published by industrial pharmaceutical corporations in the last five years, namely 2009-2013, using the Pearson correlation coefficient between classifications according to corporate working capital management strategies, as well as profitability classification (high, medium and low) to determine whether a statistically significant relationship between the strategies followed for working capital management and profitability of the corporation. The study's results revealed a stronger relationship between working capital management strategy and profitability of Jordanian industrial pharmaceutical corporations that followed a moderate strategy compared with those that followed an aggressive strategy. Furthermore, Jordanian pharmaceutical corporations didn’t follow a conservative working capital management strategy.