EFFECTS OF WORKING CAPITAL MANAGEMENT ON CYPRIOT FIRMS' PROFITABILITY

This research identifies the effect of working capital management on profitability of the 43 firms that listed in the Cyprus Stock Exchange. This research covers 10 years period of the firms operations from 1998 to 2007. The cash conversion cycle and its components such as stock holding period, debtor collection period and creditor payment period are used as the measurement of the working capital management against the profitability. The result confirms that the cash conversion cycle has a negative correlation with the profitability means that to increase profitability, firms should shorten their cash conversion cycle. Stock holding period, debtor collection period and creditor payment period has also a negative correlation with the profitability, means that the firms should reduce number of days of keeping their stock, collecting their debtors and paying their creditors in order to increase their profitability.