Firms can maximize their value by having an optimal level of working capital Deloof, Accounting and Finance, 50 American Economic Review, 77, pp. International Journal of Business and Management, 7 1 , pp. Now it is time for me to test how well my knowledge can be applied in practice. In Appendix C a table can be found giving information of how each variable is measured. These restrictions causes firms, especially smaller firms, to pass by good investment opportunities.

The difference between the lowest CCC of 4,39 days and the highest of ,32 days is staggering. International Research Journal of Finance and Economics, 24 , pp. This means that having a WCM policy which results in a low as possible accounts receivables and inventories and the highest amount of accounts payables leads to the highest profitability. Firms are seen more profitable if they give their clients more trade credit, therefore they have more clients, who means more sales, which in turn leads to more profitability. Failure to pay within the discount period could signal financial distress and it would than merit to monitor the buyer more closely.

This indicates that firms can create profit by keeping the levels of their accounts receivables to a minimum. The authors aim is to understand the relation between WCM and firm profitability of firms listed in Malaysia.

As mentioned before, authors have also studied amster three parts of the CCC individually. A negative relation was also found by articles, such as DeloofLazaridis and TryfonidisGarcia-Teruel and Martinez-SolanoKaraduman et al.


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Determinants of trade credit The VIF mastef can be found between the [ ]. For larger firms such a need for substitution does not exist, and therefore has a different effect on the profitability of larger firms.

The conclusion can be made that relative large public listed firms in The Netherlands are better of keeping their levels of accounts receivables to a minimum during non-crisis years. Commercial Motives Trade credit as price discrimination Trade credit can be used as a form of price discrimination by firms, according to whether delays and discount are given to its customers Brennan et al. American Economic Review, 77, pp. The results are presented in table 4.

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A better way of studying the longer term effect of accounts receivables would be based on quarterly data. A comparable motive of increasing inventory levels is when companies can produce cheaper in batches, which can result in relatively high inventory levels. The third chapter discusses the hypotheses.

excellent master thesis utwente

He argued that companies increase their inventory levels to reduce the cost of possible production stoppages and mastr possibility of no access to raw materials and other products. Firms can maximize their value by having an optimal level of working capital Deloof, The source of fluctuations in money: This control variables is used in the studies of DeloofRaheman and Nasr and Dong and Su Before the objective of this study is further elaborated, it will be proper to discuss the financial crisis of and first, in more detail.


Journal of Financial Economics,pp. Financial Management, 22 4pp.

excellent master thesis utwente

This means that when Indian firms increase their cash conversion cycle, profitability will be higher. As with all research, there are some limitations of this study.

Boudewijn van den Berg | University of Twente –

Communication and Inventory as Substitutes in Organizing Production. They observed a negative relation between profitability, measured through gross operation profit, and working capital management, measured with the cash conversion cycle.

Evidence from trade credit. Journal of Finance, 54 3pp.

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A couple of months later, many of the so called sub-prime loans were unravelled and it became clear that these thesos had a very high risk. Financial Review, 18 3pp. There are two ways of implementing this price discrimination to firms. To proof this effect, the following hypothesis needs to be tested: They found that smaller firms, and firms who lack product quality reputation, extend more trade credit relative to sales.

School of Management and Governance Study: These different methods will be explained in this paragraph and the major studies concerning these methods will be discussed.