How does working capital management affect the profitability of Vietnamese small- and medium-sized enterprises?. Issue 1 (20th February 2017)

• Record Type: Journal Article
• Authors: Tran, Hien; Abbott, Malcolm; Jin Yap, Chee
• Is Part Of: Journal of small business and enterprise development. Volume 24:Issue 1(2017)
• Page Start: 2
• Page End: 11
• Publication Date: 2017-02-20
• Subjects: SMEs -- Vietnam -- Profitability -- Working capital; Small business -- Great Britain -- Periodicals; New business enterprises -- Great Britain -- Periodicals; Industrial management -- Great Britain -- Periodicals; Entrepreneurship -- Great Britain -- Periodicals; 658.022
• DOI: 10.1108/JSBED-05-2016-0070
• Languages: English
• ISSNs: 1462-6004

Abstract

Abstract : Purpose: Well-designed and implemented working capital management (WCM) will encourage positive returns for a business and establish the firm's value, while ineffective management will undoubtedly lead to failure of the enterprise. The paper aims to discuss these issues. Design/methodology/approach: In business, fixed capital and working capital are the two main forms of capital used. The current assets used in the business as working capital for day-to-day operations include raw materials, work in progress, finished goods, bills receivable, cash and bank balance. This paper analyses the relationship between WCM and profitability in Vietnamese small- and medium-sized enterprises (SMEs) after integration into the global economy. Findings: The results suggest that SME owner-managers can increase their firm's profitability by reducing the number of days of accounts receivable, accounts inventories and accounts payable to an optimal minimum. In addition, a robustness check of this study indicates that high profitability will be achieved, with an optimal level of working capital investment in accounts inventories, accounts receivable and accounts payable. Originality/value: No work of this sort has been applied to Vietnamese circumstances. It is also rare in SE Asia more generally.