The association between working capital management and profitability in Iran

The primary aim of this paper is to investigate the relationship between working capital management and firm profitability. The analysis based on a sample of 50 Iranian manufacturing firms listed in the Tehran Stock Exchange (TSE) for the period 2004–2008. The depend variable, return on investment is used a measure of profitability versus six independent variables, namely current ratio, acid test ratio, current asset to total assets ratio, working capital turnover ratio, inventory turnover ratio, cash turnover ratio. Correlation analysis reveals that three variables, i.e., current ratio, acid test ratio and inventory turnover ratio are significantly associated with return on investment. From the regression analysis also revealed that an increase of one unit in current ratio, acid test ratio, inventory turnover ratio and size, increase profitability.