The Relationship between Working Capital Management and Profitability

The successful functioning of all companies is based on a high-quality and well-thought-out policy for planning certain aspects of its activities, including financial decisions. These solutions have both short-term and long-term specifics, and their study allows us to more fully assess the risks and peculiarities of the company's activities, and design a model of behavior that will bring maximum results in the future. Currently, a significant part of the work in this area is concentrated in researching the company's long-term activities: the capital structure, debt/equity ratio and the cost of capital. Along with this, funds invested in current activities and, in particular, the amounts of funds used in working capital, occupy a significant share of the company's balance sheet and, therefore, can affect its financial performance. In order to be able to assess this impact, the financial cycle of the company and the performance of its activities, expressed in the profitability of the assets, are considered in the work. The relevance of the work is due to the need for quality management of short-term aspects of the company to achieve its maximum performance. The purpose of the work is to determine the relationship between the components of working capital and the performance of companies in the Russian market. The novelty of the study lies in identifying the features of the relationship between working capital management and the performance of Russian companies. At the same time, along with identifying the relationship between the financial cycle indicator, its individual components were also considered: inventories, accounts payable and receivable. The study revealed a significant non-linear relationship between the financial cycle of the company and its performance. In addition, a non-linear relationship is also noted in the individual components of the financial cycle and performance.