The Relationship between Working Capital Management and Profitability (Case Study: Lavan Oil Refining Company)

This study examines the relationship between working capital management and profitability in Lavan Oil Refining Company, has paid to this, Lavan Refinery Company s financial statements from 1390 to first quarter of 1395 (Persian date) were studied. In this study the effect of different variables, including average collection period of receivables, working capital, inventory turnover period, the average duration of debt and the cash conversion cycle on company s operating profit have studied. Current ratio, debt ratio and the sales are used as control variables. To analyze the relationship, Pearson correlation and regression were used. The results suggest that there are meaningful relationships between working capital management and profitability. An increase in receivables collection period, increases the profitability but increase in debt payment period, inventory turnover and cash cycle, will decline the profitability.

Keywords:

average collection period , the average duration of debt , inventory turnover period , the cash conversion cycle , profitability