The Impact of Working Capital Management

on Profitability in "Egyptian Telecommunication Sector"

DBA@Cairo University /April.2013

Statement of Problem The Objectives Of the Study Limitations Of the StudyLiterature Review Methodology Table of Expected Relationships Developing Hypotheses Research Questions Research Structure

Agenda

Statement of Problem

The present study is an attempt to analyze the relationship between Working capital management and profitability of the firms working in the telecommunications’ sector in Egypt. "One of the highest growth and globally

traded sectors"

The Objectives Of the Study1. examine the relationship between the

WCM and profitability of the firms of the telecommunications industry of Egypt.

The Objectives Of the Study2. establish a relationship between the two

objectives of liquidity and profitability of the firms and to investigate the relationship between Working capital management & profitability of the firm.

Limitations Of the Study

The study is limited to five years data only, from 2008–2012, therefore, detailed analysis covering a short period, which may give slightly different results has not been made.

Limitations Of the StudyThe study is based on secondary data

collected from the telecommunications companies of Egypt; therefore the quality of the study depends purely upon the accuracy, reliability and quality of the secondary data source.

Limitations Of the StudyThe study is based on 4 companies of the

telecommunication Industry in Egypt (Telecom Egypt, Vodafone, Mobinile, & Etisalat). Therefore, the accuracy of results is purely based on the data.

Literature Review

Researcher take ROA as a

dependent variable and

independent variables are the

cash conversion cycle, number of

day accounts receivable, number

of days of inventory and number

of day’s accounts payable.

Literature Review

Researchers observed that lower gross operating profit is associated with an increase in the number days of accounts payables and this situation lead to the conclusion that less profitable firms wait longer to pay their bills taking advantage of credit period granted by their suppliers.

Literature Review

The negative relationship between accounts receivables and firms’ profitability suggests that less profitable firms will pursue a decrease of their accounts receivables in an attempt to reduce their cash gap in the cash conversion cycle.

Literature Review

They suggest to managers can create profits for their companies by handling correctly the cash conversion cycle and keeping each different component (accounts receivables, accounts payables, inventory) to an optimum level.

Methodology

Firm’s Profitability(EBIT & ROA)

Cash Conversion Cycle(CCC)

Inventory (ITID)

Current Ratio (CR)

Independent Variables Dependent VariablesCollection Policy

(ACP)

Payment Policy (APP)

Debit Ratio (DR)Income to Sale

Ratio (IS)Income to Total Sale

(IA)Sales Growth (SGROW)

Table of Expected Relationships Independent Variable Dependent variable

Collection Policy (ACP)

Profitability

Inventory (ITID)Payment Policy (APP)

Cash Conversion Cycle (CCC)

Current Ratio (CR)Debit Ratio (DR)Income to Sale Ratio (IS)

Income to Total Sale (IA)Sales Growth (SGROW)

Developing Hypotheses

H1: There is relationship between working capital management and profitability of firms.

H2: There is a relationship between liquidity of o firms and profitability.

H3: There is a relationship between debts used by telecommunications' companies and profitability.

Research Questions

Does the change in working capital impacts on the firm’s profitability of telecommunications’ companies in Egypt?

Research Structure The study is several cross-sectional units

were observed over a period of time in a panel data setting.

Data is collected Secondary source of data; Telecommunications Firms’ annual reports during years from 2008 – 2012.

Q & A

Thank You