Relationship between Working Capital Management Efficiency and Long-Term Financial Performance

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Antonio Oliveira de Carvalho, Camila Carvalho Olivera, & Ivano Ribeiro. (2019). Relationship between Working Capital Management Efficiency and Long-Term Financial Performance. Journal of Business Management and Economics, 7(07), 19–25. https://doi.org/10.15520/jbme.v7i07.2655
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Abstract

In corporate financial management, short-term financial performance involving collection and conversion of assets (assets and rights) into cash in order to meet short-term financial obligations, termed as liquidity, is of key importance for the balance and short-term financial health, as well as for attaining long-term financial performance (profitability and return). The purpose of this article is to analyze the existing correlation between liquidity, stemming from the Current Liquidity Ratio - CLR and Net Profit Margin – NPM (profitability) and Return on Assets - ROA (return). Indicators from seven fiscal years were analyzed during the economic crisis period (2011 to 2017) of twelve Brazilian publicly-traded companies, of three different sectors, with shares negotiated on the BM & FBovespa. Analyzes were performed in two phases, the first being a graphical analysis of the CLR, NPM and ROA indicators and the trends throughout the period under analysis. During the second phase a correlation analysis was performed – Spearman correlation coefficient – with the use of the SPSS software. The results obtained indicate a correlation between the liquidity, profitability and return indicators.

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