The relationship between working capital and profitability – evidence from listed food & beverages companies in vietnam

Abstract

The study explores the relationship between working capital and profitability using data collected from the financial statements of 17 food and beverage companies listed on HOSE and HNX from 2008 to 2017. The three models used in this research are Pooled Ordinary Least Squares, Fixed Effects Model (FEM), Random Effects Model (REM). The results of the model tests show that REM is the most suitable. To enhance the reliability and efficiency of the model, we conduct robustness tests. The findings indicate the presence of heteroskedasticity in the model. Therefore, the adjusted REM with the GLS method is used to handle this issue. The results of the regression analysis reveal that when the average collection period increases, gross operating profit (GOP) decreases and return on assets (ROA) increases; the average payment period has a negative influence on ROA; cash conversion cycle has a negative influence on GOP and when the inventory period increases, ROA and GOP decrease.