WORKING CAPITAL MANAGEMENT AND PROFITABILITY OF MANUFACTURING COMPANIES IN KOSOVO

Abstract

This article aims to demonstrate the profitability of the manufacturing companies in Kosovo impacted by the managing practices in the working capital. We use multiple regression analyses to estimate the effect of working capital indica-tors on profit. The Pearson correlation is used to calculate whether the variables are positively or negatively correlated and to what extent. The sample includes thirty-six manufacturing companies for the period 2012-2013. The data show that the increase in cash conversion cycle (CCC) and extension in the receivables term positively influenced operating profit and net return on assets. On the contrary, the increase in payables days had a negative effect on the operating profit and the net return on assets. The rise in inven-tory days led to increased profit. Therefore, the companies’ competitiveness is maintained mainly by extending trade credit terms to their customers and keeping the cash engaged longer in operating activities.