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Title: A deterministic approach on working capital to strategically improve company performance
Author: Briones, Oscar
ISNI:       0000 0004 7964 1918
Awarding Body: University of Liverpool
Current Institution: University of Liverpool
Date of Award: 2019
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The purpose of this investigation was to achieve three objectives: firstly, to determine to what extent profitability of Ecuadorian firms is linked with their short-term financial management; secondly, to contribute to current financial literature by providing additional variables that may explain business lucrativeness; and thirdly, to assist a real company using econometric tools. The investigation used both quantitative and qualitative research methods to obtain information. The quantitative analysis was based on annual financial statements submitted to the Ecuadorian Superintendence of Companies over a seven-year period. A series of iterative models were created, using, pooled ordinary least squares, random and fixed effects under the context of panel data. The tests revealed that fixed effects should be used to explain profitability. Qualitative information was obtained by applying action research as a means to gain in-depth knowledge of learning through action in a real company. It was found that short term financial management measured by cash conversion cycle both explains and augments profitability when working capital is diminished. Return on equity was not statistically significant; moreover, it discriminates in terms of capital structure. The investigation implemented return on assets which has been widely proven an unbiased and reliable metric to measure profitability; findings here support that view. In addition, two cash conversion cycle components: accounts receivable period and accounts payables period were found to have a significant relation with profitability. The investigation found that the ratios for fixed asset turnover and times interest earned contribute to explain firm performance. These are new control variables not previously reported, thus these findings fulfilled the second research objective. The previous axioms served as the construct for company evaluation in the case of Cronos, a firm in the corporate sector. The assembled team strove vigorously to examine the situation of the company, debate action to be taken and take decisions. This process is reported. Ultimately, the set agreed to implement an aggressive working capital management strategy which steered the firm to profitability. The third research objective was therefore also fulfilled. This process allowed action research members to both achieve firm objectives and learn while acting as a single entity whose efforts have financial repercussions for all members.
Supervisor: Nobanee, Haitham Sponsor: Not available
Qualification Name: Thesis (D.B.A.) Qualification Level: Doctoral