This led to the integration of the management of inventories, account payables and account receivables, called Working Capital Management WCM , these parts will now be discussed individually. The regression analyses are only a snapshot of the short-term benefits and further research should study the long-term benefits of increasing the number of days accounts receivables by larger firms during crisis periods. These findings suggests that smaller and larger firms, which are credit constrained, lack other financing alternatives, and thus can only use the available trade credit as the alternative fund Nilsen, Journal of Financial Economics, During the seventies and eighties of the 20th century Japanese manufacturing companies increased their activities significantly in the U. Xiaohong Huang for their support and valuable advices given to me in the making of this thesis. On the long-term, benefits of aiding customers during crisis periods are likely to grow, because future sales will still be there.

A reason for this could be that excessive levels of current assets can easily lead to a below average return on investment for a firm Raheman and Nasr, By keeping the inventories as low as possible, much storage costs are circumvented this way. An Empirical Investigation in an Emerging Market. This decline caused financial constraints for corporations all over the world, and this was also the case in The Netherlands. This control variables is used in the studies of Deloof , Raheman and Nasr and Dong and Su Yang also found evidence which implies that trade credit is a substitute of a bank loan, he also found a positive relation between accounts receivables and bank loan, which means that they are complementary to each other.

Advantages of this approach are mainly the reduction in costs due to the low levels of inventories and account receivables. On the long-term, benefits of aiding customers during crisis periods are likely excellet grow, because future sales will still be there.


As mentioned earlier in this paper trade credit can either be accounts payables or accounts receivables, but what of the other part of WCM, inventory management.

excellent master thesis utwente

This will be studied by answering the following question: Thus, a firm with high liquidity of working capital will have low risk and therefore low profitability. They used a sample consisting of companies listed on the Athens Stock Exchange from the period of Matching excellwnt was found by Utwemte et al. A similar percentage is found by Karaduman et al. Working capital is studied as a whole, but its parts are also studied individually.

Working capital is also called net working capital and is defined as current assets less current liabilities Hillier et al.

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excellent master thesis utwente

Determinants of trade credit The other main body of the literature of working capital focusses on trade credit. Size Natural logarithm of sales.

These goods are stocked in the inventory until they are sold to a customer. The results are somewhat different from the findings of Gill et al.

These findings imply that managers can create shareholder value by shortening the CCC.

Financial institutions, banking, insurance, utility companies, renting and real-estate were excluded from the sample because of their specific nature of services. European Journal of Scientific Research, 15 3pp.

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The first type uses the natural logarithm of assets to determine the size of a firm. This decrease in inventory levels is exxellent found by Rajagopalan and Malhorta who studied a number of industries in the manufacturing sector in the U. Also the risks taken by these aiding firms are relatively low and for large reputable firms it is also relatively cheap. VIF-score A number that test for multicollinearity in an ordinary least squares regression analysis.

These restrictions causes firms, especially smaller firms, to pass by good investment opportunities. This decrease in inventory levels is also found by Rajagopalan and Malhorta who studied a number of industries in the manufacturing sector in the U.


This absence of significance is likely to be caused by the negative effect of the number of days of account payables.

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Not much can be said about the other parts of the cash conversion cycle, the number of days accounts receivables and inventories, because of the absence of a significant relation. Thus managers can create value over time by increasing their accounts receivable levels of their firms during crisis periods. The second reason is demand driven, i.

excellent master thesis utwente

Higher average results of 96,1 days, 97,8 and days was found by respectively Lazaridis and Tryfonidis utwwente, Garcia-Teruel and Martinez-Solano and Sharma and Kumar Therefore the following hypotheses are developed to test if the managing of inventories and accounts payable need to be changed. Management Science, 45 6pp. The reason for this relation is in line with the second argument made by Deloofand is based on utwfnte costs involved using accounts payables.

This is because for these firms it accounts for over half their total assets Raheman and Nasr, After a crisis, this extension is sharply cut, which means that excellemt pre-crisis high short-term debt financial position is very disadvantageous after a crisis Love et al, One of these ideas affected the way of managing inventories, which was called the Just-In-Time JIT inventory management system.

Working Capital Management and Corporate Profitability: