You are on page 1of 19

International Journal of Managerial Finance

Defined strategies for financial working capital management


Anna-Maria Talonpoika, Timo Kärri, Miia Pirttilä, Sari Monto,
Article information:
To cite this document:
Anna-Maria Talonpoika, Timo Kärri, Miia Pirttilä, Sari Monto, (2016) "Defined strategies for financial
working capital management", International Journal of Managerial Finance, Vol. 12 Issue: 3,
pp.277-294, https://doi.org/10.1108/IJMF-11-2014-0178
Permanent link to this document:
https://doi.org/10.1108/IJMF-11-2014-0178
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

Downloaded on: 14 August 2018, At: 23:00 (PT)


References: this document contains references to 55 other documents.
To copy this document: permissions@emeraldinsight.com
The fulltext of this document has been downloaded 8145 times since 2016*
Users who downloaded this article also downloaded:
(2016),"(Mis)managing diversity: exploring the dangers of diversity management orthodoxy",
Equality, Diversity and Inclusion: An International Journal, Vol. 35 Iss 1 pp. 5-16 <a href="https://
doi.org/10.1108/EDI-03-2014-0020">https://doi.org/10.1108/EDI-03-2014-0020</a>
(2016),"Extending credit to small and medium size companies: Relationships and conflict
management", International Journal of Conflict Management, Vol. 27 Iss 3 pp. 331-352 <a
href="https://doi.org/10.1108/IJCMA-06-2015-0034">https://doi.org/10.1108/IJCMA-06-2015-0034</a>

Access to this document was granted through an Emerald subscription provided by emerald-
srm:507737 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald
for Authors service information about how to choose which publication to write for and submission
guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company
manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as
well as providing an extensive range of online products and additional customer resources and
services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the
Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for
digital archive preservation.

*Related content and download information correct at time of download.


The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1743-9132.htm

Defined strategies for financial Financial


working
working capital management capital
management
Anna-Maria Talonpoika, Timo Kärri, Miia Pirttilä and Sari Monto
LUT School of Business and Management, 277
Lappeenranta University of Technology, Lappeenranta, Finland
Received 19 November 2014
Revised 17 April 2015
Abstract 24 July 2015
Purpose – The purpose of this paper is to develop strategies for financial working capital 15 September 2015
management and to present previous literature on financial working capital management and 6 October 2015
its measures. 8 October 2015
12 October 2015
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

Design/methodology/approach – Qualitative comparative analysis is used to formulate the 13 October 2015


strategies, and the variables in the analysis have been selected from previous literature. Empirical data Accepted 14 October 2015
consists of 91 companies listed in the Helsinki Stock Exchange during 2008-2012.
Findings – The results indicate 11 possible strategies for financial working capital management
which all aim at increasing financial working capital. There are suitable strategies for all companies
independent from their profitability, capital intensity or working capital requirements.
Research limitations/implications – The presented strategies have been created theoretically and
have not been tested in companies, which could be done in future research.
Originality/value – This study has three contributions. First, previous literature on financial
working capital management is reviewed. Second, a novel measure for financial working capital is
developed. Third, strategies for financial working capital management are presented.
Keywords Strategy, Working capital management, Profitability, Fixed assets,
Qualitative comparative analysis
Paper type Research paper

1. Introduction
Working capital management is a vital part of financial management in companies.
Working capital presents the financial health of a company and it is connected to
profitability and liquidity (Sagner, 2014). Working capital can be divided into three
pieces: net working capital, operational working capital and financial working capital.
Net working capital, which is also sometimes simply called working capital, consists
of current assets less current liabilities. Operational working capital consists of
inventories, accounts receivables and accounts payables (e.g. Knauer and Wöhrmann,
2013). Financial working capital includes the items of net working capital which are not
tied into operational working capital, e.g. cash (Fleuriet et al., 1978).
Working capital management research has boomed in the last couple of years after
the financial crisis (Pirttilä, 2014). The research is clearly segmented, and recent studies
show that operational working capital is studied widely (Viskari et al., 2011) whereas
financial working capital research has a marginal position in the research (Souza, 2003).
Research on net working capital capital is scarce even though it is widely taught and is
presented in several text books (e.g. Preve and Sarria-Allende, 2010; Sagner, 2014).
Operational working capital management research has focussed on profitability
effects (e.g. Deloof, 2003; Yazdanfar and Öhman, 2014) and financial constraints
International Journal of Managerial
(e.g. Baños-Caballero et al., 2014; Wasiuzzaman, 2015). In addition, operational working Finance
Vol. 12 No. 3, 2016
pp. 277-294
Anna-Maria Talonpoika wishes to express her gratitude to Finnish Foundation of Technology © Emerald Group Publishing Limited
1743-9132
Promotion (Tekniikan edistämissäätiö) for financial support. DOI 10.1108/IJMF-11-2014-0178
IJMF capital management in SMEs (e.g. García-Teruel and Martínez-Solano, 2007; Pais and
12,3 Gama, 2015) has gained attention. Financial working capital management research
is nevertheless fairly underdeveloped, and financial working capital management is
usually studied as a part of some larger framework of working capital (Fleuriet et al.,
1978; Marttonen et al., 2013). The first objective of this study is to present financial
working capital and its measures through previous literature.
278 Working capital management strategies are in general operational (e.g. Monto et al.,
2013) or net working capital oriented (Shin and Soenen, 1998), but financial working
capital strategies may be insightful. This has been recognized especially in Brazilian
literature (e.g. Guimarães and Nossa, 2010) but is limited elsewhere. Guimarães and
Nossa (2010) have presented some managerial implications for financial working
capital management, and the framework of Marques and Braga (1995) provides
strategies for financial working capital as part of the dynamic working capital model.
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

However, defined strategies for financial working capital management seem to be


missing from the literature. The second objective of this study is to provide strategies
for financial working capital management. The objective is approached through
qualitative comparative analysis (QCA) and data from the Helsinki Stock Exchange.
Previous literature is used to identify variables which are connected to financial
working capital management, and QCA is used to form strategies which present the
management actions for these variables.
This study contributes to literature in three ways. First, this study presents
academic research on financial working capital management in English. Financial
working capital management (as part of the dynamic working capital model) has
mainly been studied in Brazil and the research is reported in Portuguese (Guimarães
and Nossa, 2010). This study reviews the main results in English. Second, this study
provides a novel measure for financial working capital management. Financial working
capital is previously measured by monetary value (Fleuriet et al., 1978), whereas a cycle
time measure is presented in this study. Third and finally, this study presents
strategies for financial working capital management. Previous literature has provided
strategies for net working capital management (e.g. Marques and Braga, 1995) and
operational working capital management (e.g. Lind et al., 2013), and this study presents
strategies for financial working capital management.
This paper is divided into Sections 5. The next section will provide a literature
review on financial working capital. The Section 3 describes the research design.
Analysis on the results is conducted in the Section 4. Discussion on the findings, as well
as conclusions and implications of the study, are presented in the Section 5.

2. Literature review
The first objective of this study is to present financial working capital and provide a
measure for it. This literature review starts with an overview on financial working
capital. Fleuriet et al. (1978) have presented a dynamic working capital model (also
known as Fleuriet’s model) which introduces financial working capital. The model
divides current assets and liabilities into erratic (financial) and cyclical (operating)
assets and liabilities. The financial items include mainly cash and debts whereas
operating items consider trade credit and inventories. The model also includes a term
called non-cyclical (permanent) working capital which includes fixed assets and
long-term debts and equity as liabilities. Financial working capital is measured in the
model as cash balance (or treasury balance), and operational working capital is
measured as working capital necessity (or working capital requirements); they both
present working capital in terms of monetary value. Financial working capital has also Financial
been included in the flexible asset management (FAM) model which defines it as net working
working capital less operational working capital (Marttonen et al., 2013).
The dynamic model has been presented in text books (e.g. Assaf Neto and Silva,
capital
2012) as well as in scientific publications (e.g. Nascimento et al., 2012), but it has also management
received some criticism. De Medeiros and Rodrigues (2004) argue that the relation
between operational and financial working capital has been misrepresented in the 279
model. Fleuriet (2005) reiterates in his rebuttal that the model has been verified by
empirical evidence, and similar models have also been developed in other regions
(e.g. Shulman and Cox, 1985). The model of Fleuriet et al. (1978) has been studied in
Brazil (e.g. Nogueira et al., 2012) but it has not spread to English-speaking literature,
and there are only two studies (De Medeiros, 2005; Guimarães and Nossa, 2010)
concerning the model written in English according to the authors’ knowledge.
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

The dynamic working capital model has been studied widely in previous literature.
The dynamic model presents similar information about working capital management
as traditional measures of working capital, but the dynamic model seems to be more
predictive (Modro et al., 2012; Silva et al., 2012). The model has been used to study the
financial state of companies in different branches (e.g. Correia, 2001; Santiago et al.,
1999) and in different economic conditions (e.g. Batistella, 2006; Nascimento et al., 2012).
Value creation in companies has also been studied with the dynamic working capital
model (e.g. Diláscio et al., 2007), and the parameters of the model can be used to
predict bankruptcy (e.g. Sanvicente and Minardi, 1998). Financial working capital as a
part of dynamic working capital model has been studied in all these studies, but the
study of Souza (2003) seems to be the only one concentrating on financial working
capital management.
Financial working capital has been linked to other financial variables. Marttonen
et al. (2013) have developed the FAM model which connects financial working capital
with operational working capital, fixed assets and relative profitability. Figure 1
presents these connections which arise from the balance sheet and are linked together
in the FAM model. Changes in the balance sheet will affect financial working capital.
Guimarães and Nossa (2010) studied the relation between working capital, profitability,
liquidity and solvency. The results of their study show that financial working capital is
associated with these variables, but they focussed on profitability effects when the
implications for financial working capital management were concerned. Diláscio et al.
(2007) have connected financial working capital with economic value added, and
Cardoso and Amaral (2000) have established a connection between financial working
capital and the capital asset pricing model.
The second objective of this study is to present strategies for financial working
capital management. There are several different definitions for strategy (e.g. Mintzberg,
1987; Porter, 1996). Strategy could be defined as “the dynamics of the firm’s relation
with its environment for which the necessary actions are taken to achieve its goals and/
or to increase performance by means of the rational use of resources” (Ronda-Pupo and
Guerras-Martin, 2012, p. 182). This definition has to be adjusted for working capital
management strategies because working capital is in the center instead of the firm, and
the environment can be seen as a factor affecting working capital. In previous
literature, working capital management strategies have also been created for net
working capital management (e.g. Marques and Braga, 1995; Shin and Soenen, 1998)
as well as for operational working capital management (e.g. Lind et al., 2013; Meszek
and Polewski, 2006; Monto et al., 2013), but the authors have been unable to find any
IJMF Depreciation Long-term
Equity
time
12,3 liabilities

Financial Relative
Fixed assets
working capital profitability

280 Profits

Accounts Operational
Sales Costs
payables working capital

Accounts
Inventories
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

receivables

Notes: The direct and indirect connections of selected balance


sheet items to financial working capital. Fixed assets, relative
profitability and operational working capital have direct
connection to financial working capital. Depreciation time has
indirect connection through fixed assets; long-term liabilities,
Figure 1. equity, profits, sales and costs have indirect connection through
Financial working relative profitability; and sales, accounts receivables, accounts
capital and its
connections payables and inventories have indirect connection through
operational working capital

strategies for financial working capital management in previous literature. Souza (2003)
examined financial working capital management but the study does not imply any
specific strategies for financial working capital management. Guimarães and Nossa
(2010) on the other hand have given direct managerial implications for financial
working capital but not any specific strategies.

3. Research design
3.1 Variables
The parameters of the FAM model (see Marttonen et al., 2013) are used as variables in
this study. There are a total of nine variables which can be divided into four groups:
financial working capital, operational working capital, fixed assets and profitability.
Figure 1 (see Section 2) presents the relation between the variables, and this section
provides an equation for each variable.
Financial working capital is measured using the financial flow cycle (FFC), which is
derived from the residual term in the FAM model (Marttonen et al., 2013). This
definition for financial working capital was selected because it is more universal than
the definition of Fleuriet et al. (1978), which cannot be applied to all companies due to
differences in financial statements. FFC consists of two components: other current
assets (OCA) and other current liabilities (OCL). OCA includes all OCA except
inventories and trade receivables, whereas OCL includes all OCL except trade
payables. Following equations present the calculation of FFC:

FFC ¼ OCAOCL (1)


ðCurrent assets−inventories−accounts receivablesÞ  365 Financial
OCA ¼ (2)
Net sales working
capital
ðCurrent liabilities−accounts payablesÞ  365 management
OCL ¼ (3)
Net sales
281
Operational working capital is measured using the individual components of the cash
conversion cycle (CCC) (Equation (4)). The components are the cycle time of inventories
(DIO), the cycle time of receivables (DSO) and the cycle time of payables (DPO). The
components are calculated based on the method introduced by Shin and Soenen (1998).
Inventories divided by sales and multiplied with 365 days will result in the cycle time of
inventories (Equation (5)). The cycle times for receivables and payables are similarly
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

calculated (Equations (6) and (7)):

CCC ¼ DI Oþ DSODPO (4)

Inventories  365
DI O ¼ (5)
Net sales

Accounts receivables  365


DSO ¼ (6)
Net sales

Accounts payables  365


DPO ¼ (7)
Net sales
Fixed assets are measured using the fixed assets percentage (FA%) (Equation (8)),
which proportions fixed assets to net sales. The average depreciation period (B)
measures fixed assets as well as provides information on the investments of the
company. The definition of B can be seen in Equation (9):
Fixed assets
FA% ¼ (8)
Net sales

Fixed assets
B¼ þ1 (9)
Depreciations
Profitability is measured using return on investment (ROI ) and earnings before
interests, taxes, depreciations and amortizations scaled by sales (EBITDA%). These
measures have a different perspective on profitability because ROI is calculated using
information from the income statement and balance sheet, whereas EBITDA% only
uses information from the profit and lost statement. Equation (10) presents the
calculation of ROI, and Equation (11) presents EBITDA%:
EBI T
ROI ¼ (10)
Equity þ long term liabilities
IJMF EBI T þ depreciations þ amortizations
EBI TDA% ¼ (11)
12,3 Net sales

3.2 Data collection


The data used in this study consists of 91 companies listed in OMX Nordic Helsinki
282 (Helsinki Stock Exchange) during the time period of 2008-2012. The total number of
observations is 455. The data have been collected from the financial statements of
companies by the authors themselves during the summer of 2013. The collected data are
publicly accessible due to regulations for listed companies in Finland. All the companies
used in the data sample have conducted their financial statement according to
International Financial Reporting Standards, which unifies the data. The data includes
companies from all other industries except the financial industry. Financial companies
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

were not included in the dataset because their financial structure is different and working
capital cannot be calculated similarly for those companies. The industrial breakdown of
the Helsinki Stock Exchange during the years 2008-2012 can be seen in Figure 2.
Descriptive statistics of the data can be seen in Table I. The financial working
capital cycle fluctuates between −101 and 39 days in the data. The mean length of FFC
is −28 days whereas the median length is −33 days. This indicates that most listed
companies in Finland have more current liabilities than current assets. The average
OCA is 62 days which is approximately two months. This means that companies have
two months’ sales worth of cash and OCA. The average OCL is 90 days, which
indicates three months’ worth of short-term bank debts and OCL. The descriptive

Others
3% Basic materials
Financials 10%
12%

Technology
15%

Industrials
36%

Health care
4%

Consumer services
9%
Consumer goods
11%
Notes: Helsinki Stock Exchange is divided into eight industries
Figure 2. and the relative size of the industries vary. The industries and their
Industrial share of the Helsinki Stock Exchange are: industrials (36 percent),
breakdown of the technology (15 percent), financials (12 percent), consumer goods
Helsinki Stock
Exchange (11 percent), basic materials (10 percent), consumer services
(9 percent), health care (4 percent) and others (3 percent)
Variables Mean SD Perc. 10 Median Perc. 90
Financial
working
OCA 62 63 15 44 127 capital
OCL 90 55 35 82 154
FFC −28 70 −101 −33 39 management
DIO 43 42 0 38 94
DSO 54 28 23 50 87
DPO 27 21 9 23 43 283
CCC 70 46 20 63 131
ROI 5.3% 23.7% −13.7% 7.6% 23.6%
EBITDA% 8.8% 10.5% −10.0% 8.2% 20.5%
FA% 57.8% 57.7% 15.2% 42.0% 105.2%
B 14 12 6 11 23
Notes: Mean and median values and standard deviation are reported together with the percentiles of
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

10 and 90 percent. The variables presented in the table are divided into four categories: cycle times of
financial working capital, cycle times of operational working capital, profitability and fixed assets.
The cycle times of financial working capital are other current assets (OCA) current assets less
inventories and accounts receivables, other current liabilities (OCL) other current liabilities less
accounts payables, and financial flow cycle (FFC) other current assets less other current liabilities.
Operational working capital measures are cycle time of inventories (DIO) inventories multiplied by
365 and divided by net sales, cycle time of accounts receivable (DSO) accounts receivable multiplied by
365 and divided by net sales, cycle time of accounts payable (DPO) accounts payable multiplied by 365
and divided by net sales, and cash conversion cycle (CCC) cycle time of inventories and accounts
receivable less cycle time of accounts payable. Profitability is measured by return on investments (ROI)
earnings before interest and taxes divided by equity and long-term liabilities, and earnings before Table I.
interests, taxes, depreciations and amortizations divided by net sales (EBITDA%). Relative amounts of Descriptive statistics
fixed assets are measured with fixed assets percentage (FA%) fixed assets divided by net sales, and of the Helsinki Stock
average depreciation period (B) fixed assets divided by depreciations added with one Exchange

statistics also show that the average CCC is 70 days. The relative profitability of the
companies listed on the Helsinki Stock Exchange is on average 5.3 percent measured in
ROI and 8.8 percent measured in EBITDA%. Companies have on average 57.8 percent
of fixed assets compared to their sales and B is 14 years.

3.3 Analysis method: QCA


3.3.1 The method in brief. QCA is a set-theoretic method which studies the relationship
between outcome and causal conditions (Ordanini et al., 2014). QCA is a mixed
qualitative quantitative method and it aims to identify necessary and sufficient
conditions for the outcome (Ide, 2015). The method was originally developed for
political research (Ragin, 1987), but currently it is also widely used in management
research (e.g. Fizz, 2007; Greckhamer et al., 2008). QCA has three variants: crisp set
QCA, fuzzy set QCA (fsQCA) and multi-value QCA ( Jordan et al., 2011). fsQCA is the
approach adopted in this study. The fsQCA process can be divided into three phases
which are described more closely in the following subsections (Fizz, 2011). QCA has
been selected as the research method in this study because it combines statistical
methods to improve analysis of the data. QCA also presents the direction of causal
conditions which cannot always be determined when more traditional analysis
methods are used.
3.3.2 Constructing the property space. The QCA process begins by constructing the
property space. Variables used in QCA are identified in the first step. The outcome
IJMF variable is a variable that causal conditions (equals individual variables in statistical
12,3 research) aim at explaining. (Greckhamer et al., 2008) The causal conditions, which refer
to explanatory variables, can be selected using various approaches (e.g. Amenta and
Poulsen, 1994; Yamasaki and Rihoux, 2009), and in this study the conditions have been
selected based on previous literature. The outcome variable is FFC which was
presented in Section 3.1, and the other variables (DIO, DSO, DPO, FA%, B, ROI and
284 EBITDA%) presented in Section 3.1 are considered causal conditions.
The second step of the constructing phase is calibration. The outcome and causal
conditions are calibrated into fuzzy set values a.k.a. membership scores, which are used
as reference values in the following steps. The fuzzy set calibration approach calibrates
the outcome and the causal conditions to the membership scores which range
continuously from 0 to 1. 10th percentile have been used as a threshold for the
membership score of 0, which indicates non-membership, and 90th percentile as a
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

threshold for the membership score of 1, which indicates a full membership. The other
values are given membership scores between 0 and 1 depending on their position
between the lowest and highest value. The cross-over point at 0.5 is the median value of
the variable. The percentiles and the median value can be seen in Table I (Fizz, 2011).
The third step is the formulation of a truth table which presents all different
configurations of the causal conditions. The truth table consists from all logically
possible combinations of causal conditions, which in this study is 128 (27)
configurations. A configuration presents the current situation of the variables in a
company compared to the median of the dataset, e.g. short DIO, long DSO, long DPO,
high FA% and etcetera. The membership score calibrated in the previous step
determines whether the condition is a full member or a non-member in the
configuration. The membership score of 0.5 acts as a cross-over point. Full members
have high values of the particular variable whereas non-members have low values.
There were 91 out of 128 configurations which were empirically present in the data
(Greckhamer et al., 2008; Ordanini et al., 2014). All companies have one possible
configuration but the same configuration can be in several companies. The result
indicates that 91 configurations covered all 455 cases.
3.3.3 Analyzing the property space. The property space will be analyzed in two
steps. First, the sufficiency of the causal conditions is evaluated. Ragin (1987) defines
the causal condition as sufficient if it can by itself produce the outcome in question.
This procedure is made by cross-case comparison between the configurations and the
outcome. Sufficiency is measured with a variable called consistency (Equation (12)),
which implies the degree to which one condition is a subset of an outcome. Consistency
is calculated as a sum of all cases in the configuration. First the membership scores of
individual cases are checked. The membership score with the lowest value is selected
and it can either be a membership score of a condition (independent variable, e.g. FA%)
or the membership score of the outcome (FFC ). The selected membership scores of
cases in the configuration are summed and then divided by the sum of membership
scores of cases based on conditions (the lowest value of a condition) of the
configuration. Xi presents the membership scores of a configuration and Yi presents the
membership score of the outcome (Greckhamer et al., 2008; Ragin, 2009):
P
ðminðX i Y i ÞÞ
Consistency ¼ P (12)
Xi
Second analysis considers necessary conditions which imply the degree to which the Financial
outcome is a subset of the causal conditions. Causal condition can be considered working
necessary if all occurrences of the outcome include a configuration of the causal
condition. Necessity is measured with coverage (Equation (13)). The same principle is
capital
applied to the calculation of coverage which was used to calculate consistency. The management
sum of selected membership scores of the cases are divided by the sum of membership
scores of the outcome. Xi presents the membership score of a configuration and Yi 285
presents the membership score of the outcome (Ragin, 2008):
P
ðminðX i Y i ÞÞ
Coverage ¼ P (13)
Yi

3.3.4 Evaluation and interpretation of results. The last phase includes a reduction of the
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

configurations based on the analysis presented in Section 3.3.3. The configurations are
reduced so that only sufficient and necessary conditions are included in the final
solution. First consistency is calculated for all configurations and a threshold limit is
set. Ragin (2008) recommends the threshold to be at least 0.75 but the limits should be
higher for fsQCA ( Jordan et al., 2011) and therefore the threshold of 0.90 is used in this
study. The minimum number of cases per configuration is also limited in order to
reduce the potential effect of measurement errors. The limit was set to three cases
which is consistent with previous research (e.g. Ordanini et al., 2014; Fizz, 2011).
Finally, the remaining configurations are logically reduced. The reduction is
conducted using Boolean algebra and redundant elements from the configurations are
eliminated (Fizz, 2011). The final solution of this study includes 11 configurations,
which are presented in Table II with consistency and coverage calculated for all
configurations. These configurations jointly present the best solution to explain the
outcome. It should be noted that the amount of sufficient configurations is related to
the data.

4. Data analysis
QCA provided a solution (see Table II) which included 11 configurations. These
configurations can be considered as possible strategies for financial working capital
management. The aim of QCA was to provide the best solution for the outcome, which
was the cycle time of financial working capital and therefor the aim of the strategies
can be defined as maximizing the cycle time of financial working capital. The strategies
indicate specific changes that should be made to variables (see Section 3.1 and Figure 1)
in order to increase the cycle time of financial working capital. The changes might be
difficult to implement especially in capital intensive industries because the amount of
fixed assets can be difficult to alter. The changes cannot be made quickly or even
during a fiscal year but they should be part of long-term planning. All variables are
linked to each other through the balance sheet and therefore the combination of
changes can provide an increase in the cycle time of financial working capital. Change
of only one variable might cause an inverse reaction. The strategies are not focussed on
actually managing the financial working capital components instead the focus is on
affecting variables.
The possible strategies are presented in Table III. The table displays the strategies
in columns and the variables which are affecting financial working capital are situated
in rows. The upward arrow indicates that the variable should be maximized to achieve
IJMF Configurations Raw coverage Unique coverage Consistency
12,3
dio*dpo*fa*B*ebitda 0.23 0.02 0.87
dso*DPO*fa*B*ebitda 0.25 0.04 0.89
dpo*fa*b*ROI*EBITDA 0.33 0.02 0.88
dio*dso*dpo*b*roi*ebitda 0.20 0.02 0.91
dio*DPO*fa*b*roi*ebitda 0.21 0.02 0.91
286 DIO*dso*dpo*FA*b*roi 0.17 0.02 0.90
DIO*dso*dpo*fa*ROI*ebitda 0.21 0.00 0.89
DIO*dso*fa*b*ROI*EBITDA 0.25 0.01 0.92
dio*DSO*fa*b*ROI*EBITDA 0.25 0.01 0.90
dio*dso*dpo*fa*B*ROI 0.21 0.00 0.93
dio*dso*dpo*fa*ROI*EBITDA 0.25 0.00 0.93
Solution coverage: 0.60
Solution consistency: 0.83
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

Notes: The configurations which jointly form the solution of the qualitative comparative analysis.
Uppercase letters indicate a full membership in the configuration; (membership score ⩾ 0.5) and
lowercase letters indicate a non-membership in the configuration (membership score o0.5). Raw
coverage the sum of the lowest membership scores of the cases divided by the sum of membership
scores of the outcome in the configuration, unique coverage the lowest membership score of the cases
divided by the sum of membership scores of the outcome in the configuration and consistency the sum
of lowest membership scores of the cases divided by the lowest membership scores of the conditions in
Table II. the configuration. Solution coverage the sum of lowest membership scores of the cases divided by the
Solution of the sum of membership scores of the outcome in all cases present in the configurations, and solution
qualitative consistency the sum of lowest membership scores of all cases present in the configurations divided by
comparative analysis the lowest membership scores of the conditions in all configurations

the best possible financial working capital cycle time and the downward arrow
implies that the variable should be minimized. There are some missing arrows which
indicate that the particular variable does not have an effect on financial working capital
when the strategy is used.
The strategies have been grouped according to profitability requirements. The first
group includes five strategies which fit companies which have poor profitability (below
median, see Table I) since the strategies have the requirement to minimize profitability.
The second group also includes five strategies but the strategies require maximization
of profitability and are suitable for companies that already have good profitability
(above median, see Table I). The third group consists of only one strategy because the
profitability requirements in the strategy are controversial. ROI should be maximized
whereas EBITDA% should be minimized.
Strategy 1a would be appropriate for a company with poor profitability. The
company should aim at reducing the cycle times of all operational working capital
components. Depreciation periods should be minimized because they affect cycle time
of financial working capital through the balance sheet. The strategy could be used by a
wide range of companies. The results[1] indicate that the strategy would be suitable for
companies related to consumer products and services, including health care services.
The companies in these branches are operating directly with consumers, and the
service business does not require large inventories, which will help to achieve the aim
of the strategy.
Strategy 1b would be suitable for a company that has problems with profitability.
The company should reduce the cycle time of inventories and increase the payment
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

Strategies
1a 1b 1c 1d 1e 2a 2b 2c 2d 2e 3

Operational working capital


DIO ▼ ▼ ▲ ▼ ▼ ▲ ▼ ▼ ▲
DSO ▼ ▼ ▼ ▲ ▼ ▼ ▼ ▼
DPO ▼ ▲ ▼ ▼ ▲ ▼ ▼ ▼ ▼
Fixed assets
FA% ▼ ▲ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼
B ▼ ▼ ▼ ▲ ▲ ▼ ▼ ▼ ▲
Profitability
ROI ▼ ▼ ▼ ▲ ▲ ▲ ▲ ▲ ▲
EBITDA% ▼ ▼ ▼ ▼ ▲ ▲ ▲ ▲ ▼
Notes: The symbol ▲ indicates that the variable should be maximized and symbol ▼ indicates that the variable should be minimized. The financial working
capital management strategies (1a-3) are presented in columns and the affecting variables are presented in rows. The variables are divided into three groups:
operational working capital (cycle time of inventories (DIO), cycle time of accounts receivables (DSO) and cycle time of accounts payables (DPO)), fixed assets
(fixed assets percentage (FA%) and average depreciation period (B)) and profitability (return on investment (ROI) and earnings before interest, taxes,
depreciations and amortizations percentage (EBITDA%))
management

capital management
capital

financial working
Financial

Table III.
working

Strategies for
287
IJMF period of its accounts payables. This will allow the company to provide flexible trade
12,3 credit conditions for its customers. The strategy suggests that the relative amount of
fixed assets should be reduced and depreciation periods should be minimized for longer
cycle time of financial working capital. The results imply that this strategy could be
appropriate for technology companies and companies producing consumer goods
because these branches do not have large inventories or large manufacturing capacities
288 which is required in the strategy.
Strategy 1c would be possible for a company with poor profitability. The strategy
implicates that the cycle time of inventories should be increased whereas the cycle
times of accounts receivables and accounts payables should be minimized. The relative
amount of fixed assets needs to be maximized but the depreciation periods should be
kept short. The results suggest this strategy to industrial companies producing basic
materials and industrial products. These two branches are traditionally associated with
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

large amounts of fixed assets, like machinery. The companies also operate in the
business to business field and therefore trade credit also plays a role in the financial
working capital management strategy.
Strategy 1d would benefit a company with relatively small amount of earnings.
The company should minimize the cycle time of inventories and accounts payables.
The relative amount of fixed assets should be decreased and simultaneously the
average depreciation periods could be increased to ensure longer cycle time of financial
working capital. The results imply that industrial companies engaged in project
business could use this strategy. Project business does not usually require large
inventories and the amount of fixed assets is also limited, especially in consulting
companies, and therefore this would be a suitable strategy for these companies.
Strategy 1e would be possible for a company whose earnings are at a low level.
The company should optimize its trade credit by reducing the cycle time of accounts
receivables while increasing the cycle time of accounts payables no matter how long
the cycle time of inventories. The company also needs to reduce the relative amount of
fixed assets and increase the average depreciation period to achieve a long cycle time of
financial working capital. This strategy could be considered an almost universal
strategy for all companies because the results indicate that the strategy could be
suitable for a very wide range of companies; basically all other branches are included
except basic materials and technology branches.
Strategy 2a would be suitable for a company with good profitability conditions.
The company should reduce the cycle time of inventories while increasing the cycle time
of accounts receivables. The company can adjust the cycle time of accounts payables to
accommodate the request for inventories and accounts receivables since the cycle time of
accounts payables is irrelevant in this strategy. The company is also required to decrease
the relative amount of fixed assets as well as the average depreciation period for a longer
financial working capital cycle time. The results imply that this strategy could be used by
the technology industry. Technology companies do not often have inventories or
machinery as fixed assets as the business is based on project consulting.
Strategy 2b would be possible for a company with good profitability. The company
should increase the cycle time of inventories and reduce the cycle time of accounts
receivables to lengthen the cycle time of financial working capital. The company is also
advised to reduce the relative amount of fixed assets and the average depreciation
period. The results indicate that manufacturing companies, in industrial setting as well
as in consumer goods, would benefit from using this strategy. These companies often
need large inventories, which are also noted in the strategy.
Strategy 2c would be appropriate for a company whose profitability is above Financial
average. The company should decrease the cycle time of all the components of working
operational working capital as well as the relative amount of fixed assets. The results
suggest that this strategy could be used by two branches which are very different from
capital
each other. These branches are publishing, which is a part of consumer goods, and management
industrial project consulting. The connecting factor between these two branches seems
to be received advance payments (Talonpoika et al., 2014). 289
Strategy 2d would be suitable for a company whose profitability is at a high level.
The company needs to reduce the cycle time of accounts payables, while the cycle times
of inventories and accounts receivables are irrelevant for the solution. The strategy also
demands decreases to the relative amount of fixed assets and the average depreciation
period. The results reveal that this strategy would be especially suitable for technology
companies which mainly do project business. The business is based on services
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

provided for customers and therefore no inventory or machinery is needed.


Strategy 2e would be possible for a company with good profitability. The company
should reduce the cycle times of all the components of operational working capital. The
relative amount of fixed assets also needs to be decreased, whereas the average
depreciation period could be increased. The results indicate that this strategy could
benefit the same industries as strategy 2c. The industries are consumer services,
especially publishing, and industrial consulting.
Strategy 3 would be appropriate for a company whose ROI is good but EBITDA%
is at a lower level. The company is advised to increase the cycle time of inventories
while decreasing the cycle times of accounts receivables and payables. The relative
amount of fixed assets needs to be reduced but the average depreciation period does
not need to be changed. The results imply that this strategy could be used by
industrial companies which do not have manufacturing operations, such as
construction companies.

5. Discussion and conclusions


This study has three contributions. The first contribution is the presentation of
academic research on financial working capital management. Braga et al. (2004) claim
that the dynamic working capital model is fairly known in the academia. Guimarães
and Nossa (2010), on the other hand, state that the model is known only in Brazil and
the studies are reported in Portuguese which is also authors’ conclusion since only
two studies (De Medeiros, 2005; Guimarães and Nossa, 2010) were found in English.
However, financial working capital management has been presented related to another
framework (Marttonen et al., 2013). This study provided a brief overview on the
previous literature on financial working capital management (e.g. Marques and Braga,
1995). The literature review also presented the connections of financial working capital
with other financial variables (e.g. Cardoso and Amaral, 2000; Marttonen et al., 2013)
which were partially used in this study to formulate strategies for financial working
capital management.
The second contribution is the novel measure for financial working capital. In their
model, Fleuriet et al. (1978) measured financial working capital and other working capital
components in monetary value, which has also been used in previous studies (e.g. Vieira
and Bueno, 2008) which have used the dynamic working capital model as their framework.
Marttonen et al. (2013), on the other hand, included a residual term in their FAM model
which corresponds to financial working capital in the dynamic model. In this study, the
residual term was transformed into a measure called FFC. FFC presents financial working
IJMF capital as a cycle time in days which is analogous to the CCC, which is the most common
12,3 measure for operational working capital (Knauer and Wöhrmann, 2013).
The third contribution is the defined strategies for financial working capital
management. Strategies have been created for operational working capital
management (e.g. Meszek and Polewski, 2006) but financial working
capital management research is only focussed on the financial analyses of
290 companies (Souza, 2003). This study presented 11 possible strategies for financial
working capital management which were formulated using the QCA method. The
method was chosen because it has been suggested for strategy research since it
presents the interdependence of factors affecting the studied subject (Greckhamer et al.,
2008). The variables which were used to formulate the strategies in this study were
chosen from the FAM model (Marttonen et al., 2013) because it presented a wide variety
of variables which were shown to have a connection with financial working capital
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

compared to some other variables (e.g. Diláscio et al., 2007).


The strategies presented in this study aim to improve financial working capital by
increasing the cycle time of financial working capital. This goal is in-line with the
findings of Guimarães and Nossa (2010) which suggest increasing the amount of
financial working capital if the company goal is better financial health. The strategies
are based on changes in variables in order to achieve the set goal of improving financial
working capital. The changes are required for all variables because they are connected
to each other through the balance sheet. Changes in a single variable can cause
undesired effects but the combination of changes should increase the cycle time of
financial working capital. The 11 strategies can be linked to the dynamic working
capital model framework of Marques and Braga (1995). The strategies presented in this
study could be used to improve finances through altering the level of operational
working capital.
This study has some limitations. The strategies created in this study are theoretical
and they have not been tested in actual companies. The strategies are also not focussed
on managing financial working capital components and instead they focus on variables
affecting the cycle time of financial working capital. In this study, QCA has been used
to formulate the strategies. Greckhamer et al. (2008) suggest this method for strategy
constructing, and other studies (e.g. Ordanini et al., 2014; Tóth et al., 2015) have also
shown the usefulness of the method. The method shows causal relations and
interdependencies between affecting variables but the solution is still theoretical, which
is a major limitation. The selection of variables could also be seen as a limitation. The
variables in this study were selected from a single framework; the FAM model
(Marttonen et al., 2013) was chosen because it presented parameters that could be
affected through internal decisions compared to parameters which are more influenced
by external factors (e.g. Cardoso and Amaral, 2000).
The time period in this study can be considered to be a recession or at least
downturn in the economy and it may have affected the results. The interest rates were a
bit lower for companies although not as low as they were for consumers, but debt
financing was difficult to acquire which could have affected financial working capital.
A minor limitation of this study can be found in the literature review. Studies on
financial working capital management were fairly difficult to find because most of the
studies have been presented in conferences and the publications are in journals which
are not indexed in international databases. The literature review is therefore very brief.
The native language of the authors is not Portuguese, which also limits the overview on
previous literature related to the dynamic working capital model.
Future research should consider testing the strategies developed in this study. Financial
The strategies could be tested by implementing the strategies in case companies and working
observing changes in their financial working capital. Survey research could also be
conducted to study current financial working capital management practices in
capital
companies. These practices have been mapped for operational working capital management
management (e.g. Howorth and Westhead, 2003), but there is no research on financial
working capital management. The effect of interest rates and the economic cycle to 291
financial working capital management strategies could be studied in the future.
A comprehensive literature review on financial working capital management could be
conducted to see the current state of research in the field. Future research could have a
detailed look to the management of financial working capital items (OCA and OCL)
because this study focussed only on variables which are affecting the cycle time of
financial working capital.
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

Note
1. The detailed configuration results are available upon request.

References
Amenta, E. and Poulsen, J.D. (1994), “Where to begin: a survey of five approaches to selecting
independent measures for qualitative comparative analysis”, Sociological Methods and
Research, Vol. 23 No. 1, pp. 22-53.
Assaf Neto, A. and Silva, C.A.T. (2012), Administração do capital de giro, 4th ed., Atlas, São Paulo.
Baños-Caballero, S., García-Teruel, P.J. and Martínez-Solano, P. (2014), “Working capital
management, corporate performance, and financial constraints”, Journal of Business
Research, Vol. 67 No. 3, pp. 332-338.
Batistella, F.D. (2006), “Análise dinâmica do capital de giro e inflação: um estudo de caso em
empresa de recursos hídricos”, paper presented at 6th Congresso USP Controladoria
e Contabilidade, São Paulo, July 27-28, available at: www.congressousp.fipecafi.org/web/
artigos62006/an_resumo.asp?cod_trabalho¼205 (accessed July 17, 2015).
Braga, R., Nossa, V. and Marques, J.A.V.d.C. (2004), “Uma proposta para a análise integrada da
liquidez e rentabilidade das empresas”, Revista Contabilidade & Finanças, Vol. 15,
Special Issue, pp. 51-64.
Cardoso, D. and Amaral, H.F. (2000), “Correlacionando o beta do modelo capm – capital asset
pricing model com as variáveis do modelo Fleuriet: uma análise da siderúrgica belgo
mineira”, paper presented at 20th Encontro Nacional de Engenharia de Produção
(ENEGEP), São Paulo, October 30-November 1, avalaible at: www.abepro.org.br/biblioteca/
ENEGEP2000_E0160.PDF (accessed July 17, 2015).
Correia, L.F. (2001), “Perfil econômico-financeiro do setor têxtil brasileiro: análise da liquidez no
período de 1996 a 1998”, Revista de Administração, Vol. 36 No. 1, pp. 25-34.
De Medeiros, O.R. and Rodrigues, F.F. (2004), “Questionando empiricamente a validade do
modelo Fleuriet”, Revista de Administração e Contabilidade da Unisinos, Vol. 1 No. 2,
pp. 25-32.
De Medeiros, O.R. (2005), “Questioning Fleuriet’s model of working capital management in
empirical grounds”, available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_
id¼700802 (accessed March 5, 2015).
Deloof, M. (2003), “Does working capital management affect profitability of Belgian firms?”,
Journal of Business Finance and Accounting, Vol. 30 No. 4, pp. 573-587.
IJMF Diláscio, R.E., Souza, J.A. and de Oliveira, V.I. (2007), “EVA e o modelo Fleuriet: o uso intrumentos
de otimização em árvores de criação de valor”, Revista Ciências Administrativas, Vol. 13 No. 1,
12,3 pp. 122-146.
Fizz, P.C. (2007), “A set-theoretic approach to organizational configurations”, Academy of
Management Review, Vol. 32 No. 4, pp. 1180-1198.
Fizz, P.C. (2011), “Building better causal theories: a fuzzy-set approach to typologies in
292 organization research”, Academy of Management Journal, Vol. 54 No. 2, pp. 393-420.
Fleuriet, M.J. (2005), “Fleuriet’s rebuttal to ‘Questioning Fleuriet’s model of working capital
management on empirical grounds’ ”, available at: http://papers.ssrn.com/sol3/papers.cfm?
abstract_id¼741624 (accessed May 5, 2015).
Fleuriet, M.J., Kehdy, R. and Blanc, G.A. (1978), A Dinâmica financeira das empresas brasileiras,
Fundação Dom Cabral, Belo Horizonte.
García-Teruel, P.J. and Martínez-Solano, P. (2007), “Effects of working capital management
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

on SME profitability”, International Journal of Managerial Finance, Vol. 3 No. 2,


pp. 164-177.
Greckhamer, T., Misangyi, V.F., Elms, H. and Lacey, R. (2008), “Using qualitative comparative
analysis in strategic management research”, Organization Research Methods, Vol. 11 No. 4,
pp. 695-726.
Guimarães, A.L.d.S. and Nossa, V. (2010), “Working capital, profitability, liquidity and
solvency of healthcare insurance companies”, Brazilian Business Review, Vol. 7 No. 2,
pp. 37-59.
Howorth, C. and Westhead, P. (2003), “The focus of working capital management in UK small
firms”, Management Accounting Research, Vol. 14 No. 2, pp. 94-111.
Ide, T. (2015), “Why do conflicts over scarce renewable resources turn violent?”, Global
Environmental Change, Vol. 33 No. 1, pp. 61-70.
Jordan, E., Gross, M.E., Javernick-Will, A.N. and Garvin, M.J. (2011), “Use and misuse of
qualitative comparative analysis”, Construction Management and Economics, Vol. 29
No. 11, pp. 1159-1173.
Knauer, T. and Wöhrmann, A. (2013), “Working capital management and firm profitability”,
Journal of Management Control, Vol. 24 No. 1, pp. 77-87.
Lind, L., Monto, S., Pirttilä, M., Nickich, O. and Kärri, T. (2013), “A negative cash conversion cycle:
opportunity or threat to the value chain?”, paper presented at 22nd Annual IPSERA
Conference, Nantes, March 24-27.
Marques, J.A.V.d.C. and Braga, R. (1995), “Análise dinâmica do capital de giro – o modelo
Fleuriet”, Revista de Administração de Empresas, Vol. 35 No. 3, pp. 49-63.
Marttonen, S., Monto, S. and Kärri, T. (2013), “Profitable working capital management in
industrial maintenance companies”, Journal of Quality in Maintenance Engineering, Vol. 19
No. 4, pp. 429-446.
Meszek, W. and Polewski, M. (2006), “Certain aspects of working capital in a construction
company”, Technological and Economic Development of Economy, Vol. 12 No. 3,
pp. 222-226.
Mintzberg, H. (1987), “The strategy concept 1: 5 Ps for strategy”, California Management Review,
Vol. 30 No. 1, pp. 11-24.
Modro, W.M., Famá, R. and Petrokas, L.A. (2012), “Modelo tradicional x modelo dinâmico de
análise do capital de giro: um estudo comparativo entre duas empresas de mesmo setor
com diferentes performances financeiras”, FACEF Pesquisa – Desenvolvimento e Gestão,
Vol. 15 No. 1, pp. 90-106.
Monto, S., Lind, L. and Kärri, T. (2013), “Working capital models: avenues for financial Financial
innovations”, paper presented at the 24th ISPIM Conference, Helsinki, June 16-19.
working
Nascimento, C.d., Espejo, M.M.d.S.B., Voese, S.B. and Pfitscher, E.D. (2012), “Tipologia de Fleuriet capital
e a crise financeira de 2008”, Revista Universo Contábil, Vol. 8 No. 4, pp. 40-59.
management
Nogueira, L.R.T., Curi, M.A. and Nuintin, A.A. (2012), “Relação da rentabilidade e da liquidez
como valor de Mercado das empresas brasileiras de capital aberto: estudo do setor de
energia elétrica”, paper presented at IX Convibra Administração – Congresso Virtual 293
Brasileiro de Administração, São Paulo, November 23-25, available at: www.convibra.com.
br/upload/paper/2012/33/2012_33_3845.pdf (accessed July 17, 2015).
Ordanini, A., Parasuraman, A. and Rubera, G. (2014), “When the recipe is more important than
the ingredients: a qualitative comparative analysis (QCA) of service innovation
configurations”, Journal of Service Research, Vol. 17 No. 2, pp. 134-149.
Pais, M.A. and Gama, M. (2015), “Working capital management and SMEs profitability:
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

Portuguese evidence”, International Journal of Managerial Finance, Vol. 11 No. 3,


pp. 341-358.
Pirttilä, M. (2014), “The cycle times of working capital: financial value chain analysis method”,
PhD thesis, Acta Universitatis Lappeenrantaensis 609, Lappeenranta University of
Technology, Lappeenranta.
Porter, M.E. (1996), “What is strategy?”, Harvard Business Review, Vol. 74 No. 6, pp. 61-78.
Preve, L.A. and Sarria-Allende, V. (2010), Working Capital Management, Oxford University Press,
Oxford.
Ragin, C.C. (1987), The Comparative Method: Moving Beyond Qualitative and Quantitative
Strategies, University of California Press, Berkeley, CA.
Ragin, C.C. (2008), Redesigning Social Inquiry: Fuzzy Sets and Beyond, University of Chicago
Press, Chicago, IL.
Ragin, C.C. (2009), “Qualitative comparative analysis using fuzzy sets (fsQCA)”, in Rihoux, B. and
Ragin, C.C. (Eds), Configurational Comparative Methods: Qualitative Comparative Analysis
(QCA) and Related Techniques, Sage, Thousand Oaks, CA, pp. 87-122.
Ronda-Pupo, G.A. and Guerras-Martin, L.Á. (2012), “Dynamics of the evolution of the strategy concept
1962-2008: a co-word analysis”, Strategic Management Journal, Vol. 33 No. 2, pp. 162-188.
Sagner, J.S. (2014), Working Capital Management: Applications and Cases, John Wiley & Sons,
Hoboken, NJ.
Santiago, W.P., Amaral, H.F., Filho, F.B.C., Botelho, E.M., Couto, J.E. and Lopes, M.V. (1999),
“Aplicação do modelo dinâmico no setor têxtil de Montes Claros: uma contribuição para a
gestão financeira”, paper presented at 19th Encontro Nacional de Engenharia de Produção
(ENEGEP), Rio de Janeiro, November 3-4, available at: www.abepro.org.br/biblioteca/
ENEGEP1999_A0420.PDF (accessed July 17, 2015).
Sanvicente, A.Z. and Minardi, A.M.A.F. (1998), “Identificação de indicadores contábeis
significativos para previsão de concordata de empresas”, working paper, Finance Lab,
Insper Instituto de Ensino e Pesquisa, São Paulo, November, available at: http://
EconPapers.repec.org/RePEc:ibm:finlab:flwp_3 (accessed July 8, 2015).
Shin, H.-H. and Soenen, L. (1998), “Efficiency of working capital management and corporate
profitability”, Financial Practice and Education, Vol. 8 No. 2, pp. 37-45.
Shulman, J.M. and Cox, R.A.K. (1985), “An integrative approach to working capital management”,
Journal of Cash Management, Vol. 5 No. 6, pp. 64-84.
Silva, J.O.d., Santos, V.d., Hein, N. and Lyra, R.L.W.C.d. (2012), “Nível informacional entre a
análise tradicional e avançada do capital de giro”, Revista Pretexto, Vol. 13 No. 2, pp. 40-56.
IJMF Souza, M.S. (2003), “Gestão da tesouraria das empresas”, Contabilidade Vista & Revista, Vol. 14
No. 3, pp. 99-111.
12,3
Talonpoika, A.-M., Monto, S., Pirttilä, M. and Kärri, T. (2014), “Modifying cash conversion cycle:
revealing concealed advance payments”, International Journal of Productivity and
Performance Management, Vol. 63 No. 3, pp. 341-353.
Tóth, Z., Thiesbrummel, C., Henneberg, S.C. and Naudé, P. (2015), “Understanding configurations
294 of relational attractiveness of the customer firm using fuzzy set QCA”, Journal of Business
Research, Vol. 68 No. 3, pp. 723-734.
Vieira, S.F.A. and Bueno, W. (2008), “O modelo dinâmico de análise econômico-financeira de
empresas: uma aplicação nas companhias distribuidoras de energia elétrica do sul do
Brasil”, paper presented at 28th Encontro Nacional de Engenharia de Produção (ENEGEP),
Rio de Janeiro, October 13-16, available at: www.abepro.org.br/biblioteca/
enegep2008_tn_sto_071_503_12065.pdf (accessed May 18, 2016).
Downloaded by Universitas Tarumanagara At 23:00 14 August 2018 (PT)

Viskari, S., Lukkari, E. and Kärri, T. (2011), “State of working capital management research:
bibliometric study”, Middle Eastern Finance and Economics, Vol. 5 No. 14, pp. 99-108.
Wasiuzzaman, S. (2015), “Working capital and firm value in emerging market”, International
Journal of Managerial Finance, Vol. 11 No. 1, pp. 60-79.
Yamasaki, S. and Rihoux, B. (2009), “A commented review of applications”, in Rihoux, B. and
Ragin, C.C. (Eds), Configurational Comparative Methods: Qualitative Comparative Analysis
(QCA) and Related Techniques, Sage, Thousand Oaks, CA, pp. 123-146.
Yazdanfar, D. and Öhman, P. (2014), “The impact of cash conversion cycle on firm profitability”,
International Journal of Managerial Finance, Vol. 10 No. 4, pp. 442-452.

Further reading
Silva Brito, G.A. and Assaf Neto, A. (2008), “Modelo de classificação de risco de crédito de
empresas”, Revista Contabilidade & Finanças, Vol. 19 No. 46, pp. 18-29.

About the authors


Anna-Maria Talonpoika (MSc) is a Doctoral Student in the LUT School of Business and
Management at the Lappeenranta University of Technology, Finland. She received her MSc
(Tech.) in Industrial Management in 2012 and after that she has worked in the academia.
Her research interests include capital, capacity and cost management. Her doctoral studies focus
on measuring and managing financial working capital. Anna-Maria Talonpoika is the
corresponding author and can be contacted at: annamaria.talonpoika@gmail.com
Timo Kärri is a Professor (Acting) in the School of Industrial Engineering and Management at
the Lappeenranta University of Technology, Finland. He received his DSc (Tech) in Industrial
Management in 2007. His dissertation considered timing of capacity changes in capital intensive
industries and the current research interests include capital, capacity and cost management.
Miia Pirttilä (DSc) is a Post-Doctoral Researcher in the LUT School of Business and
Management at the Lappeenranta University of Technology, Finland. She received her DSc (Tech.)
in Industrial Management in 2014. Her research interests include capital, capacity and cost
management. Her dissertation focussed on working capital management in value chain context.
Sari Monto (DSc) is working in the private sector. She received her DSc (Tech.) in Industrial
Management in 2013. Her research interests include financial supply chain management,
accounting in networks and cost management. Her dissertation was related to working capital
management in inter-organizational context.

For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com