How does working capital management affect firm profitability in China's agricultural sector?

Working capital management (WCM) is one of the most important issues in the field of financial management, and plays an important role in increasing firm profitability. The objective of this paper is to evaluate the impact of WCM on the profitability of Chinese agricultural companies. This impact is examined using descriptive and correlation as well as regression analysis for an eight -year period (2012-2019). The empirical results show that after controlling for characteristics of the company and macroeconomic conditions payable deferral cycle has a positive impact on firm profitability measured by return on assets (ROA). The results also confirm a convex quadratic relationship between receivable collection cycle and ROA. In addition, we find a positive relationship between firm size and sales growth and ROA and a negative relationship between debt used by the firm and ROA. This paper determines the requirements for efficient WCM in order to maximize the profitability of analyzed companies.