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Determinants of Working Capital Management: Case of Nigerian
Manufacturing Firms

+.&. Salawu
1,
(J. -. -lao
2
1.Department of .anagement -ccounting( &bafemi-wolowo /niversit0( Ile-Ife &sun State.Nigeria
Email1 osalawu220a3oo.co.u4
2.Department of 5an4ing and 6inance( 5owen /niversit0( Iwo &sun State.Nigeria
Email1 alao7o3n%)20a3oo.co.u4

Abstract
83is stud0 e9plored t3e factors determining t3e wor4ing capitalwit3 t3e view to providing information on
empirical tests t3at constitutes t3e determinants of wor4ing capital management in t3e listed manufacturing firms
in Nigeria.
83e stud0 used secondar0 data sources w3ic3 were collected from t3e -nnual +eport and -ccounts of si9t0
purposivel0 selected non-financial :uoted companies in t3e Nigerian Stoc4 E9c3ange 6act boo4. Data on
financial variables suc3 as sales( purc3ases( inventor0( creditors( debtors and total assets were e9tracted from t3e
-nnual +eports of t3ese non-financial :uoted companies between t3e periods 2-2*. 83is was w3en t3e
countr0 started to e9perience financial policies for t3e ban4ing sector under t3e democratic dispensation.
.acroeconomic data on t3e annual growt3 rate of t3e ;ross Domestic "roduct was obtained from t3e Statistical
5ulletin of t3e <entral 5an4 of Nigeria. Data collected were anal0=ed using descriptive and inferential statistics.
83e results s3owed t3at t3e significant factors determining wor4ing capital included sales growt3( si=e of t3e
firm( gross domestic product( leverage. 83e proportion of fi9ed assets to total assets and t3e net trading c0cle(
also determined wor4ing capital but were not significant at t3e five percent level.
Keywords: wor4ing capital management( purposive( non-financial :uoted companies( financial policies(
democratic dispensation.

Introduction
<orporate finance basicall0 deals wit3 t3ree decisions1 capital structure decision( capital budgeting decision and
wor4ing capital management decisions. -mong t3ese( wor4ing capital management defined as t3e abilit0 of an
organi=ation to fund into t3e s3ort term asset and s3ort term liabilit0 is a ver0 important component of corporate
financing since it affects t3e profitabilit0 and li:uidit0 of a firm or compan0 and finall0( its value >arris !2%#.
It deals wit3 t3e wa0 of financing current assets and liabilities. Its main goal is to ensure t3at companies 3ave
sufficient cas3-flow to continue normal operations in suc3 a wa0 t3at minimi=e ris4 of inabilit0 to pa0 s3ort-term
liabilities 5rig3am ?;apens4i !1**)#. @or4ing capital management is important because of its effects on t3e
firmAs profitabilit0 and ris4( and conse:uentl0( its value Smit3 !1*$#. 6irm value is more important to 3ave
sustainable growt3 rate for a business to attract prospective investors. Since value of t3e firm is t3e form t3at
investors motivate to invest in t3e business( an increase of value will benefit t3e firmAs prestige b0 increasing
future growt3..anagement of wor4ing capital 3elps managers to manage t3eir operation of t3e firm t3roug3
ma4ing available cas3 to pa0 for s3ort-term debt and t3e maturit0 of long term debt as well as e9penses resulting
from dail0 operations. So( an optimal level of wor4ing capital must be4ept to tradeoff between return and ris4
+an7it3!2$#.
roblem !tatement and ob"ecti#e:Determining t3e important factors affecting wor4ing capital management
would 3elp managers to determine t3e optimal level of investment in current assets as well as t3e appropriate
sources of financing t3em. In addition( t3e0 will be well prepared and read0 for unpredicted situations t3at 3ave
une9pected effects on firmsA performance. Bittle attention was given to t3e determinants of wor4ing capital
management w3ile financial managers in Nigeria spent most of t3eir time on wor4ing capital management.83ere
are scant0 empirical evidences on t3e factors determining wor4ing capital management in t3e manufacturing
sector of t3e Nigerian econom0. 83is stud0 attempts to identif0 some of t3e factors w3ic3 determine wor4ing
capital management in Nigeria manufacturing firms. 83e t3eoretical contribution will enric3 t3e e9isting
literature b0 t3e determinants of wor4ing capital management in Nigeria manufacturing firms.
$iterature %e#iew
83eoretical Issues1 83e interaction between current assets and current liabilities is t3e main t3eme of t3e t3eor0
of wor4ing capital management. 83e t3eor0 describe 3ow wor4ing capital s3ould be managed and demonstrate
t3e benefits in terms of li:uidit0( solvenc0( efficienc0( profitabilit0( and s3are3olders wealt3 ma9imi=ation w3ic3
accrue to t3e compan0 from appropriatel0 managing capital 5rig3am( et al !1***#( ;itman !1**7#. Efficient
wor4ing capital management implies sufficient li:uidit0 in t3e operations of t3e enterprise and it involves
planning and controlling current assets and current liabilities in a manner t3at eliminates t3e ris4 of inabilit0 to
meet due s3ort term obligations on one 3and and avoid e9cessive investment on t3ese assets on t3e ot3er
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3and;itman !1**7#. - firm is re:uired to maintain a balance between li:uidit0 and profitabilit0 w3ile
conducting its da0-to-da0 operations. Bi:uidit0 is a precondition to ensure t3at firms are able to meet its s3ort-
term obligations and its continued flow can be guaranteed from a profitable ventureCesseven !2D#.
E9cessive as well as inade:uate wor4ing capital positions are dangerous from t3e firmAs point of view.
Inade:uate wor4ing capital not onl0 impairs t3e firmAs profitabilit0 but also results in productions interruptions
and inefficiencies in sales disruptions. 8oo muc3 wor4ing capital means 3olding costs and idle funds w3ic3 earn
no profit asinventor0 mis3andling( wastes( t3eft and losses result. -side from t3is( tendencies of accumulating
inventories could cause speculative inventories to grow t3ereb0 fostering liberal dividend polic0 t3at mig3t be
difficult to cope wit3 w3en t3e firm is unable to ma4e speculative profit+amamoort30!1*7D#( and "ande0!2)#.
Conceptual Issues1 83e wor4ing capital needs of a particular business are li4el0 to c3ange overtime as a result
of c3anges in t3e business environment. 83is implies t3at wor4ing capital decisions are constantl0 being made.
.anagers tr0 to identif0 c3anges in an attempt to ensure t3at t3e level of investment in wor4ing capital is
appropriate. <3anges in interest rates( c3anges in mar4et demand( c3anges in t3e seasons( and c3anges in t3e
state of t3e econom0 are crucial to t3e determinant of wor4ing capital. <3anges arising wit3in t3e business suc3
as using different production met3ods !resulting per3aps in a need to 3old less stoc4# and c3anges in t3e level of
ris4 t3at managers are prepared to ta4e could also alter t3e level of investment in wor4ing capital. -s a result of
e9pansion and contractions in t3e business c0cle t3e investment in wor4ing capital will fluctuate in aggregate(
and t3e composition of t3e constituent components of t3e investment in wor4ing capital can be sub7ect to a
considerable degree of volatilit0 +ic3ards and Baug3lin!1*$#. 83e needs for wor4ing capital increase during
period of economic growt3( and s3ould decrease as economic growt3 contracts @eston and 5rig3am!1**2#. 6or
e9ample w3en t3e econom0 is robust and in an e9pansionar0 p3ase( debtors and inventor0 ma0 increase notabl0(
w3ereas wit3 t3e onset of a recession a prudent business ma0 appl0 more restrictive credit policies t3ereb0
reducing credit sales( and 3ence debtors. .oreover production ma0 be reduced because of a slac4ing in
consumer demand. 83is will in all probabilit0 result in a reduction of inventor0. Some businesses tend to build
up wor4ing capital w3en t3e econom0 is strong( but t3en sell inventories and 3ave net reductions of receivables
w3en t3e econom0 slac4s off 5rig3man et al. !1***#.
Just as c3anges in business conditions 3ave an impact on debtors and inventor0( so too will t3e0 3ave an impact
on t3e level of cas3 and on t3e forms and sources of financing of wor4ing capital. During an e9pansionar0 period(
t3e increase in sales and 3ence production needs to be paid for( w3ic3 in t3e normal course of business leads to
an increased demand for cas3. @it3 t3e slowing of t3e cas3 conversion c0cle during an economic slowdown( t3e
level of wor4ing capital is li4el0 to rise temporaril0 and wit3 it will be an increase in t3e need for cas3 to finance
a longer cas3 conversion c0cle -sc3 and Ca0e!1*$*#( +ic3ards and Baug3lin!1*$#.
83e business c0cle 3as a considerable impact on t3e structure of time denominated assets !namel0 s3ort-term and
long-term assets#. During a recession consumption ma0 decline( w3ic3 ma0 result in debtors declining( doubtful
and bad debts ma0 increase( and stoc4s of unsold or unprocessed inventor0 ma0 rise as production contractsE
w3ile during an e9pansion( consumption ma0 increase( and debtors ma0 increase as sales increases
Nawroc4i!1**7#. @3en t3e lending interest rate is 3ig3( firms would invest less in t3eir wor4ing capital. During
t3e mar4eting downturn( most factors pla0 more significant role in determining wor4ing capital management
w3ile t3e factors appear to 3ave less role for t3e firms t3at alread0 3ave ver0 3ig3 level of wor4ing capital. 83ese
findings lend support to pec4ing order 30pot3esis and agenc0 t3eor0 and are of great interest to investors(
corporate governors and regulators.
6urt3er identifiable factors affecting wor4ing capital are1 Nature( c3aracter and si=e of t3e businessE seasonal
variationsFmar4et and demand conditionsE manufacturing and credit policiesE price level c3angesE rate of stoc4
turnoverE t3e level of tec3nolog0 etc.
Essentiall0( t3e management of wor4ing capital is influenced b0 e9ternal and internal factors. @3ile e9ternal
macro factors are affecting all companies regardless of industr0( onl0 companies wit3in a particular industr0 are
affected b0 e9ternal micro-factors. >owever( bot3 opportunities and t3reats can arise from an0 of t3em. -t an
organi=ation level( a set of internal factors impact on all processes and activities including wor4ing capital
management but in different manners according to t3e direction and relations3ip between t3em. <onse:uentl0 an
abilit0 to interpret and respond to t3e c3anges in t3ese environmental variables is critical Jo3nson and Soenen
!2G#.
&t3er notable factors are monetar0 polic0 and t3e manner in w3ic3 it is implemented b0 virtue of its impact on
price levels and e9c3ange rate( fiscal polic0 because of t3e impact of ta9ation and t3e term structure of interest
rates because of its impact on t3e cost of finance of different maturities ;itman!1**7#( 5rig3am and
;apens4i!1**)#.

&mpirical &#idence
<3iou and <3eng !2D# considered t3e factors affecting wor4ing capital management in 8aiwan firms. 83e
stud0 considered bot3 e9ternal and internal variables i.e. macroeconomic and firm specific variables. 83eir
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findings indicated t3at !i# during t3e economic slump( firms 3ave more wor4ing capital re:uirement( !ii# debt
ratio( operating cas3-flow to total assets are negativel0 associated to t3e wor4ing capital re:uirement !iii# 6irmAs
age( return on assets are positivel0 associated wit3 wor4ing capital re:uirement.
Na=ir and -f=a !2$# e9amined t3e various factors t3at determine wor4ing capital re:uirement for 2)
manufacturing firms for t3e period 1***-2D in "a4istan. 83e results based on panel &BS estimation( found
t3at operating c0cle( leverage( return on assets !+&-# and 8obinAs : are t3e internal factors w3ic3 significantl0
influence wor4ing capital. 83e result also s3owed t3at wor4ing capital management practices are also related to
industr0 and different industries are following different wor4ing capital re:uirements.
<aballero et al !2*# conducted a stud0 to determine wor4ing capital management in small and medium-si=ed
Spanis3 corporations !S.Es#. 83e panel of )7D S.Es firms over t3e period 21-2% was selected. <as3
<onversion <0cle !<<<# was used as a compre3ensive pro90 for t3e efficienc0 of wor4ing capital management.
"anel data anal0sis including &BS( regression and fi9ed effect model were applied. 83eir results indicated t3at !i#
firms wit3 longer <<< are older firms wit3 more cas3-flows. !ii# t3e <<< correlated negativel0 to t3e debt ratio(
firmAs growt3( fi9ed assets investment and return on assets. !iii# No evidence for t3e effect of interest rates and
;D" on t3e <<<.
Har0awati et al !21# investigated important factors w3ic3 affect wor4ing capital management in .ala0sian
firms. "anel data anal0sis including pooled &BS regression was emplo0ed and t3e results compared to fi9ed
effect and random effect models for robustness tests. +esults indicated t3at !i# firm si=eE debt ratio and sales
growt3 3ave negative relations3ip wit3 t3e <<<. !ii# firms wit3 more debt 3ave less wor4ing capital since t3e
cost of e9ternal financing is 3ig3er for t3ese firms. !iii#a negative relations3ip between <<< and sales growt3
indicated t3at corporations use s3ort-term financing to suppl0 future demands. 83e positive relations3ip between
economic growt3 and wor4ing capital indicated t3at firms e9panded t3eir investment on wor4ing capital during
economic boom. +esult found no evidence for t3e impact of corporate governance variables on wor4ing capital
management.
;ill !211# focused on t3e <anadian companies to determine wor4ing capital management. -ppl0ing panel data
anal0sis( &BS regression and correlation coefficient( 3is results s3owed t3at wor4ing capital re:uirement
positivel0 correlated to t3e operating c0cle( return on assets. +esult furt3er s3ows t3at wor4ing capital
re:uirement negativel0 correlated to t3e firm si=e and 8obinAs :. >is findings indicated no significant
relations3ip between wor4ing capital re:uirement( debt ratio and operating cas3-flow.
-4inlo( !212# Investigated t3e determinants of wor4ing capital re:uirements of DD firms in Nigeria using panel
data for t3e period 1**7-27 and t3e ;... 83e results suggested t3at sales growt3( firmsA operating c0cle(
economic activit0( si=e and permanent wor4ing capital are firm specific c3aracteristics t3at positivel0 drive
wor4ing capital polic0. Beverage was found to be inversel0 related to wor4ing capital re:uirements. 83e findings
suggest t3at some of t3e insig3ts from modern finance t3eor0 are potable to Nigeria.
-bbadi and -bbadi( !21G# studied t3e variables t3at determine wor4ing capital in "alestinian industrial firms.
83e0 establis3ed an econometric model and estimated parameters based on panel data for 11 "alestinian
industrial companies listed on t3e "alestinian Securit0 E9c3ange for t3e period 2) to 211. 83e stud0 used
wor4ing capital as t3e endogenous variable and some financial and economic variables suc3 as cas3 conversion
c0cle( operating cas3 flow( leverage( farm si=e( return on assets( interest rate on loans and economic growt3 as
e9ogenous variables. 83e stud0 found t3at cas3 conversion c0cle( return on assets and operating cas3 flow are
significant determinants positivel0 related to wor4ing capital re:uirement( w3ile leverage and firm si=e are also
significant but negativel0 related to wor4ing capital re:uirement. Economic variables suc3 as interest rate and
read ;D" growt3 rate 3ave no significant impact on wor4ing capital. Stud0 also found t3at "alestinian firms
maintain a si=able wor4ing capital w3ic3 ma0 be due to a long cas3 conversion c0cle !over si9 mont3s# and to
conservative policies due to instable economic and political conditions.

Met'odology
-s at t3e time of t3is stud0( 2G7 firms cutting across over fifteen sectors of t3e Nigerian econom0 were listed on
t3e Nigerian Stoc4 E9c3ange. &nl0 1$D firms are activel0 traded on t3e floor of t3e E9c3ange. 83ese constitute
t3e population for t3is stud0. 83e stud0 e9cluded t3e financial sectors i.e. ban4ing( insurance and investment
sectors because of t3e peculiarit0 in t3eir cas3 3olding policies w3ic3 are substantiall0 different from t3at of t3e
non-financiall0 :uoted companies. Si9t0 !D# nonfinancial :uoted firms were purposivel0 selected on sect oral
basis suc3 as breweries( c3emical and paint( food and beverages( industrialFdomestic products etc. 83e
preparation and submission of annual reports covering t3e period of stud0 !2-2*#( and t3e going concern
basis :ualifies a firm for selection. 83e selected firms from eac3 sector are contained in table !i#. Secondar0 data
were emplo0ed consisting of computed variables from t3e balance s3eet as well as t3e profit and loss account of
t3e selected firms. .acroeconomic variables were sourced from t3e <entral 5an4 of NigeriaAs 21 statistical
bulletin.8o investigate t3e determinants of wor4ing capital of selected :uoted firms( we emplo0ed correlation
matri9 to measure t3e degree of association between different variables under considerationE and regression
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anal0sis w3ic3 entails t3e specifications of functional relations3ip between wor4ing capital re:uirement and its
determinants.

Model !pecification
@e state our model as follows1
@<
it
IJ
it
K J
1
S;+
it
K J
2
N8<itK J
G
B&S
it K
J
)
"6-6
it
K J
%
BE'
it
K J
D
;D" K J
7
<ontrol 'ariables K

it
LLLLLLLLLLLLLL!i#
@3ere1 @< represents t3e @or4ing <apital
S;+ is t3e sales growt3
N8< is t3e Net 8rading <0cle
B&S is t3e firm si=e
"6-6 is t3e "roportion of firmAs asset represented b0 fi9ed assets
BE' is Beverage
;D" is 5usiness indicator
83is e:uation states t3at wor4ing capital re:uirements measured as difference between wor4ing li:uid assets less
li:uid liabilities and cas3 conversion c0cle is a function of sales growt3( net operating c0cle( firm si=e(
proportion of a firmAs assets accounted for b0 fi9ed assets( leverage and business indicator measured as t3e
growt3 rate of t3e level of economic activit0.

Measurement of #ariables
@or4ing capital is measured as t3e difference between wor4ing li:uid assets less li:uid liabilities. Sales ;rowt3
is measured as t3e current 0ear sales less last 0ear salesF last 0earAs sales. Net 8rading <0cle is measured as t3e
-verage <ollection "eriod plus !Inventor0F Net Sales# less !-ccounts "a0ableF "urc3ases#. 6irm Si=e is
measured as t3e Natural Bogarit3m of Sales. "roportion of 6irms -sset represented b0 fi9ed asset is measured as
6i9ed -ssetsF 8otal -ssets. Beverage is measured as 8otal 6inancial DebtF8otal -ssets. ;D" is t3e business
indicator measured as t3e growt3 rate of t3e level of economic activit0.

%esults
83e statistics of different variables in our model for t3e determinants of wor4ing capital are presented in table
!ii#.83e mean and median values are wit3in t3e ma9imum and minimum values of t3e series. 83e relativel0 low
standard deviations for most of t3e series indicate t3at t3e deviations of actual data from t3eir mean values are
ver0 small. 83e statistics clearl0 s3ow t3at t3e series are positivel0 s4ewed meaning t3at all distributions 3ave
long rig3t tail. In terms of t3e pea4ness or flatness of t3e distribution of t3e series measured b0 4urtosis( t3e data
s3owed t3at t3e series are pea4ed relative to t3e normal e9cept for t3e ;D". 83is is because t3e 4urtosis of t3e
ot3er series e9ceeds G. 83e probabilit0 t3at t3e Ja:ue-5era statistic e9ceed !in absolute value# t3e observed value
is generall0 low for all t3e series. 83is suggests t3e re7ection of normal distribution at %M.
83e correlation matri9 on table !iii# captured t3e variables in our model for t3e determinants of wor4ing capital.
Beverage( si=e of t3e firm( proportion of fi9ed assets to total assets( sales growt3 and business indicator are
positivel0 related to wor4ing capital. 83is suggests t3at as t3ese variables increases( wor4ing capital also
increases.

&mpirical models
83e results of t3e determinants of wor4ing capital using panel regression models suc3 as fi9ed effect and random
effect model are presented on tables !iv# and !v#. &n t3e panel least s:uare fi9ed effects( t3e results s3ow a
positive and significant relations3ip between t3e wor4ing capital and sales growt3. 83is implies t3at increase in
sales growt3 leads to increase in wor4ing capital. /sing t3is model as t3e lead( a 1M increase in sales growt3
will lead to .)D increases in wor4ing capital. 83e coefficient of t3e net trading c0cle is positive and
insignificant in model II w3ile it is negative and insignificant in model 1. 83e logarit3m of sales is used to
measure t3e si=e of t3e firm. 83e relations3ip between t3e si=e and wor4ing capital is positive and significant in
t3e two models. 83is corroborates t3e view t3at larger firms 3ave more financing alternatives availableE 3ence
t3ese firms more easil0 afford investments in wor4ing capital. Si=e measured b0 t3e logarit3m of sales could
come out wit3 a negative relations3ip w3en cas3 conversion c0cle is used as a pro90 for wor4ing capital. 83e
cas3 conversion c0cle actuall0 measures t3e efficienc0 of wor4ing capital management b0 firms. If t3e
regression comes out wit3 a negative relations3ip( it will mean t3at t3e larger t3e firm si=e( t3e s3orter t3e cas3
conversion c0cle or t3e smaller t3e firm si=e( t3e longer t3e cas3 conversion c0cle( suggesting t3at smaller firms
s3ould loo4 for wa0s to s3ortening t3eir cas3 conversion c0cles.
83e coefficient of t3e proportion of fi9ed assets to total assets is negative and insignificant in t3e two models.
83is suggests t3at as t3e proportion of fi9ed assets to total assets increases( t3e wor4ing capital decreases. 83ere
is no clear-cut definition of leverage in t3e academic literature. 83e specific c3oice depends on t3e ob7ective of
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t3e anal0sis. -n additional issue is w3et3er leverage s3ould be computed as t3e ratio of t3e boo4 or t3e mar4et
value of e:uit0. @e 3ave measured leverage as t3e ratio of total financial debt to total assets. &ur results s3ow
t3at leverage is negativel0 and significantl0 related to wor4ing capital. 83is indicates t3at wit3 a rising debt to
total assets ratio( t3e firms are supposed to pa0 more attention towards efficient management of @or4ing <apital
to avoid muc3 capital being tied up in accounts receivables and inventories. >ence( firms wit3 an increasing debt
to total assets ratio !3ig3 leverage# s3ow lower wor4ing capital re:uirement in support of t3e pec4ing order
t3eor0.
In t3e two models t3e gross domestic product is positivel0 and significantl0 related to wor4ing capital. -s t3is
variable increases( wor4ing capital also increases. >owever( a fluctuation in t3e general economic activit0 in t3e
long-run is e9pected to be negativel0 related to wor4ing capital. It mig3t not be eas0 for a firm to raise fund
during t3e period of economic fluctuations w3en cas3 suppl0 is relativel0 tig3t. 8o retain capital for dail0
operations( wor4ing capital re:uirement must be 4ept at a 3ig3er level( and business indicator is e9pected to be
negativel0 proportional to wor4ing capital. 83e e9pansion of a firm ma0 not be as smoot3 as e9pected during
economic fluctuations( wit3 possibl0 longer time periods for collecting accounts receivable or possibl0 e9pended
inventories due to decline in sales. >ence a relativel0 3ig3 net volume of wor4ing capital ma0 occur.
&ver t3e period of t3is stud0( t3e Nigerian econom0 did not witness significant progress in terms of economic
growt3. "er3aps t3e financial sector e9perienced boom during t3e period. /nfortunatel0( t3e boom in t3e
financial sector did not filter into t3e productive sector especiall0 t3e manufacturing sector. Increased lending
rate( inconsistent power suppl0 among ot3ers resulted into ver0 3ig3 production costs during t3e period of stud0.
83is ripple effect of production leads to 3ig3 product price and in a situation of elastic demand( consumers are
li4el0 to abandon t3e product in favour of imported close substitutes. Eventuall0( t3e firm ma0 go into
li:uidation as it 3ad been wit3 t3e Nigerian Dunlop t0re and ot3ers leaving Nigeria for ;3ana w3ere t3e cost of
production and power generation are relativel0 stable. -gain( t3e Stoc4 .ar4et 3ad not muc3 to offer during t3e
stud0 period. 83is was as a result of t3e cras3 in t3e Stoc4 .ar4et.

Conclusions and %ecommendations
@or4ing capital management is crucial to firms as it is used to generate furt3er returns for t3e s3are3olders.
-llocating more t3an enoug3 of wor4ing capital will render management non-efficient wit3 adverse effect on
s3ort-term investments. If wor4ing capital is too low( t3e firm ma0 miss a lot of profitable investment
opportunities or suffer term li:uidit0 crisis t3at could lead to degradation of compan0 credit. 83is e9plains t3e
rationale be3ind t3e 4nowledge of t3e determinants of wor4ing capital and its effects on profitabilit0. &ur stud0
s3ows t3at t3e determinants of wor4ing capital are sales growt3( trading c0cle( si=e( proportion of firmsA asset
represented b0 fi9ed assets( leverage and business indicator measured as growt3 rate of economic activit0. @e
recommend t3at t3ese variables s3ould be properl0 addressed to determine t3e optimal level of investments in
current assets as well as t3e appropriate sources of financing t3em. 83e model for future studies s3ould include
as man0 ot3er firm and nonfirm specific c3aracteristics as evident in t3e literature.
(able )i* !ampled Firms
!+No !ector+Industry No, of Firms )!ample* ercentage-
1 6ood and beverages 1 1D.7
2 "rinting and publis3ing G %.
G <3emical and paints D 1.
) Industrial and domestic products 7 11.7
% 5reweries % $.G
D 5uilding materials % $.G
7 >ealt3 care * 1%
$ -gricultureF-gro allied % $.G
* 8e9tile 2 G.G
1 6ootwear 2 G.G
11 -utomobile ?80re 2 G.G
12 <onglomerate ) D.7
8otal D 1

Journal of Economics and Sustainable Development www.iiste.org
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Descriptive Statistics
S;+ N8< B&S "6-6 BE' ;D"
.ean .2)$G27 D7.GGD% D.G*2G$$ .G$G2G1 1.$7)%7* %G%D).2
.edian .17*$% G.)*%*) D.$1% .G% 1.D)% %))7%G.7
.a9imum 2.7$)D* *)).DG 11.1D$)D 1.2DDG* 2G.%2)27 71D*)*.7
.inimum -.$7GD) -1G72.7$ 1.*2E-D .1$727 -2.)$%) G2*17$.7
Std. Dev. .)2712 %D$.DDG1 2.D2G%G .2D)1D G.2*)D 12)21.2
S4ewness 2.*D22 1).2$)D -.*G2D% .7$*22G .1DG$71 -.1*%%G
Curtosis 1D.$D17% 2GG.D% G.G1*22) G.2G*7D) 27.)G%* 1.$%$1*
Jar:ue-5era G2*.$*G 71**G1.) )7.7%G7 GG.*$D)2 7*)1.*2 1*.)22%
"robabilit0 .D1
Sum 7*.)D)% 21%)%.$1 2)%.%D) 122.DGG* %**.$D%G 1.7EK$
Sum S:. Dev. %$.1DDG 1.GEK$ 21D.G)% 1G.%*177 2$7D.D)1 ).*2EK12
&bservations %* %* %* %* %* %*

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<orrelation .atri9
<<< ;D" BE' B&S N8< "6-6 S;+ @<

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8able !iv# 6i9ed Effect .odel
6actors Determining @or4ing <apital
Dependent variable1 @<( .et3od1 "anel Beast S:uares
Date1 *F7F1 8ime1 12.1*( Sample1 2- 2*
"eriods included1 1( <ross-sections included1 %*( 8otal panel !balanced# observations1 %*
'ariable <oefficient Std. Error t-Statistic "rob.
< .$* .12%7 D.GD%$% .
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BE' -.)27DD .12%* -G.G*D*17 .7,
;D" .G21 .12*$ 2.)DD1)$ .1),

Journal of Economics and Sustainable Development www.iiste.org
ISSN 2222-17 !"aper# ISSN 2222-2$%% !&nline#
'ol.%( No.1)( 21)

%%
Effects specification
<ross-section fi9ed !dumm0 variables#
"eriod fi9ed !dumm0 variables#
+-s:uared .%)$$)1 .ean dependent var .1%G%G
-d7usted +-s:uared .%2$G$ S.D. dependent var .221%%
S.E of regression .17$$%2 -4ai4e info criterion -.)$7D$
Sum s:uared resid 1D.%%* Sc3war= criterion .D1D*1
Bog li4eli3ood 217.$D%7 >annan-Nuinn criter. -.27GDD
6-statistic %.G7212 Durbin-@atason stat 1.*G)DG1
"rob !6-statistic# .
.significiant at %M level
Source1 -ut3ors <omputa
8able !v# +andom Effect .odel
Dependent 'ariables1 @<( .et3od1 "anel E;BS !8wo-wa0 random effects#( Date1 *F7F12. 8ime112.1*( Sample1
2 -2*( "eriods included1 1( <ross-sections included1 %*( 8otal panel !balanced# observations1 %*
'ariable <oefficient Std. Error t-Statistic "rob.
< .$2) .2)*D7 G.2%22$ .1)
S;+ .G%2*D .227% 1.%*$*12 .1),
N8< .21) .*%1) .22)DG .*$21
B&S .$1) .2%G* G.1*1D$2 .1%,
"-6- -.7GG .1)*) -.)*G%1 .D2)1
BE' -.)77*1 .11**7 -G.*$GD$* .1,
;D" .GDG7G .12%7 2.*$2* .G$,
Effect specification
S.D +3o
<ross-section random .$$)1D .1$12
"eriod random .%771$ .772
Idios0ncratic random .17$$%2 .7)1D
@eig3ted Statistics
+-s:uared .%GD72 .ean dependent var .)*)2$
-d7usted +-s:uared .%17G$7 S.D. dependent var .1*))*%
S.E of regression .17*%*1 Sum s:uared resid 1$.$G)2
6-statistic 17.*D*%7 Durbin-watson stat 1.*G*G*%
"rob !6-statistic# .

,Significant at %M level
Source1 -ut3ors <omputation

%&F&%&NC&!
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Journal of Economics and Sustainable Development www.iiste.org
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'ol.%( No.1)( 21)

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pp.%2-%G.
Cesseven"adac3i !2D# 8rends in @or4ing <apital .anagement and Its Impact on 6irms "erformance1 -n
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