Components of Working Capital Management and Its Impact on Profitability: An Applied Study on Basic Materials Companies Listed in the Saudi Stock Market

Abstract

      The study aimed at investigating the impact of working capital management components (Period Collection Average, Period Conversion Inventory, Period Payables Average and Cycle Conversion Cash) on the profitability of basic materials companies listed on the Saudi Exchange market measured by return on assets for the period (2013-2022). Using a sample of (24) companies by using the cross-sectional data model (panel data), specifically the fixed effects model, the study reached the following results: there is an inverse effect for the variable  of period collection average, period conversion inventory, period payables average and cycle conversion cash on the profitability of basic materials companies. The study represents an addition to the literature in terms of knowledge of the role of working capital management in achieving corporate profitability. The study recommends that the management of basic materials companies  should  pay attention to working capital management by reducing the period of keeping it in inventory, reducing the period of collection of accounts receivable and increasing ayables period for the positive impact it has on the profitability of companies.