Relationship Between The Net Trade Cycle

1155 WordsOct 29, 20165 Pages
highly statistically significant. Soenen (1993) examined the relationship between the net trade cycle as a measure of working capital and return on investment in the US enterprises. The results of chi-square check showed a negative relationship among the length of net trade cycle and return on assets. In addition, this opposite relationship was found to be different across industries. A significance relationship for approximately half of industries studied showed that results might differ from industry to industry. Another fact of working capital management was examined by Lamberson (1995) who examined how small enterprises react to fluctuations in economic activities by moving their working capital requirements and the level of current assets and liabilities. Current assay to current liabilities ratio, current assets to total assets ratio, and inventory to total assets ratio were used as a measure of working capital, however, the index of the annual average coincident economic meter was used as a measure of economic activity. Opposing to expectations, the study found that there is a very slight relationship between fluctuations in economic circumstances and changes in working capital. To conenterprise the results of Soenen (1993) on large sample and with longer time period, Joseet al. (1996) tested the relationship among aggressive working capital management and profitability of the US enterprises, using the Cash Conversion Cycle (CCC) as a measure of working capital
Open Document