The effects of working capital management on the profitability of the firms listed in Tehran Stock Exchange

This study investigates the effects of working capital management on the profitability of the firms listed in Tehran Stock Exchange. Withthis regard, variables such as receivables collection period,  inventory conversion period, accounts  payable  payment  period,  and cash conversion cycle  are used for the measurement of  working capital management, and Return  on Assets  (ROA) is used for the measurement of  profitability of  the  firms. Moreover, Sales growth, Leverage, and Size are used as control variables. Using multiple regression and considering the results of  investigations of 224 firms  in the period from 1382 to 1386, we find that  there  is a negative significant correlation between receivables collection period, Inventory conversion period, and cash conversion cycle with  the  profitability of firms listed  in Tehran Stock Exchange. No evidence confirming significant correlation between accounts payable payment period and profitability is found. Considering this, the negative significant correlation between profitability and Cash conversion cycle measuring the joint effects of receivables collection period, Inventory conversion period and Accounts payable payment period indicates that firms can increase  their profitability and create value for  their  stockholders by appropriate management of working capital and decreasing Cash conversion cycle logically.