A Review of Anatomy of Working Capital Management Theories and the Relevant Linkages to Working Capital Components: A Theoretical Building Approach

This study examines the importance of working capital management concepts and components, notably the receivable management, inventory management and payable management through their respective proxies as average collection period, inventory conversion period and average payment period. Due to its importance, working capital management could best be explained philosophically when theories are employed. These theories are instruments and not answer to enigmas, but their relevance and aid in explaining concepts is enormous and cannot be overlooked. Therefore, this study attempts to explain those working capital management components and concepts and establish a link with some of the suitable theories perceived to be relevant in explaining them. These theories include agency/stakeholder, risk and return, cash conversion cycle, operating cycle and the resource-based theory. The study is found necessary in view of the dearth of literature of its kind and especially in the area of working capital management. The paper therefore employed a conceptual research design approach in addressing this phenomenon. The necessary link was finally established between the theories and working capital concepts and components. Keywords: Working Capital Management, Average Collection Period, Inventory Conversion Period, Average Payment Period

Liquidity-profitability trade-off : is it evident among Malaysian SMEs?

The purpose of this study is to empirically examine the relationship between liquidity and profitability on a sample of small and medium sized enterprises (SMEs) in the Malaysian manufacturing sector.Using the nonparametric spearman rank correlation coefficient analysis,the result reveals that there is a moderate positive association between liquidity levels.The same test is again employed to establish the association between the two variables, signifying that larger small firms tend to maintain higher liquidity levels.Finally,the Kruskal-Wallis test statistic was applied to investigate whether or not different industry sectors had different levels of liquidity. The outcome confirms that different industry sectors do have different of liquidity

Tawaran awam permulaan : Tinjauan prestasi sepanjang dekad

Artikel ini meninjau prestasi tawaran awam permulaan (IPO) di BSKL sepanjang dekad terakhir abad ke-20. Tawaran awam permulaan adalah tawaran untuk melanggan terbitan sekuriti bam buat kali pertama oleh sesebuah syarikat kepada pelabur awam melalui penanggungjaminan atau mmah pe,nerbitan. Tawaran awam permulaan ialah salah satu cara syarikat meraih modal yang diperlukan sama ada untuk membiayai projek pelaburan, menambahkan modal kerja atau membayar balik hutang. Dekad 1990-an telah menyaksikan peningkatan tawaran awam permulaan dari tahun ke tahun dari segi bilangan dan juga jumlah dana yang dikumpulkan. Sebelum krisis kewangan, premium tawaran awam permulaan yang tinggi dan lebihan langganan menjadi fenomena yang lumrah. Bagaimanapun, selepas knsis melanda, premium terbitan bam mula mengecil, banyak terbitan bam diniagakan pada harga diskaun, dan bilangan tawaran awam permulaan juga telah merosot. Antara alasan yang mungkin menyebabkan pengurangan tawaran awam permulaan di BSKL ialah prestasi kurang menggalakkan dan sentimen kurang bermaya di pasaran, harga pembukaan yang tidak menggalakkan, kekurangan modal untuk melanggan terbitan baru, dan kebimbangan pelabur asing terhadap bursa saham tempatan.Daripada pemerhatian dan kajian yang pernah dijalankan, prestasi tawaran awam permulaan didapati bersandar kepada prestasi ekonomi semasa. Bilangan tawaran awarn permulaan sepanjang dekad 1990-an meningkat seiring dengan prestasi ekonomi negara dan merosot apabila negara dilanda kegawatan ekonomi. Selain daripada bilangan syarikat dan jumlah dana yang dikumpulkan, premium dan lebihan langganan saham baru juga turut menunjukkan arah aliran yang sama

Stated motivation for share buybacks in Malaysia

Share buyback is a recent phenomenon in the Malaysia capital market.It has only been allowed since 1997 as a response to the currency crisis to shore up market share prices.This study explores companies states motivations for undertaking share buyback.It examines' 40 companies' circulars to shareholders between October 1999 and May 2002, to identify the companies' stated motivations for undertaking share buybacks.Apart from identifying the stated motivations, the study also detects motivations that are the most stated, and those that appear to be accorded greater emphasis.The findings, with the use of non-parametric statistics, indicate that out of the nine motivations for share buybacks, four motivations are hardly stated by the companies.These include (1)distribute cash, (2) issue stocks under the Employee Stock Option Schemes, (3) change capital structure, and (4)anti-takeover measure.The other five motivations are widely stated, and these are (1) pay stock dividend, (2)investment opportunity, (3) stabilise share price, (4)use surplus cash, and (5) increase shareholder return/EPS.The first of these widely stated motivations appears to be given less relative emphasis because it is stated consistently later in the circulars to shareholders, compared to the other widely stated motivations

Sumbangan institusi kewangan kepada pembangunan perniagaan francais di Malaysia: Mitos atau realiti?

Sungguhpun kerajaan telah memainkan peranan utama dalam menvediakan pembiayaan kepada francais dan francaisor melalui pelbagai kemudahan dan skim bantuan, penglibatan dan penyertaan bank dan institusi kewangan dalam membangunkan sektor perniagaan francais ini amat mengecewakan.Selain sebilangan kecil bank perahgangan yang terbabit secara tidak langsung dengan pengeluaran pinjaman melalui skim jaminan kredit, institusi kewangan di Malaysia kelihatan seperti mengabaikan sektor ini.Justeru, kertas ini bertujuan untuk mengkaji dan menilai sumbangan institusi kewangan terhadap pembangunan francais di Malaysia serta mengupas isu-isu berkaitan dengan francais yang perlu dselesaikan sebelum sektor ini dapat mencapai tahap kemajuan yang boleh dibanggakan

Efficiency in SME: Malaysian evidence

Most studies on SMEs in Malaysia have looked at the performance of SMEs, especially by using the qualitative method.However, this study is different from previous studies where it offers a new insight of SMEs by looking at the efficiency of SME.Using 40 companies as the sample, this study analyse whether SME companies have used their current assets efficiently in getting sales.Surprisingly, the results show that most companies are not efficient in managing their current assets to produce sales. Since current asset or working capital is very crucial in running a business, the results might offer an insight of why most SMEs failed in their business

Trade Credit Management Practices of Malaysian Small and Medium-Sized Enterprises in the Manufacturing Sector

Considered as the engine of growth, small and medium-sized enterprises (SMEs) in Malaysia are heavily assisted and supported by various government agencies. Nonetheless, previous studies indicated that SMEs were facing many problems, where the most common finance-related problem was the lack of financing. However, the existence of various sources of financing in the market raised doubt as to whether the lack of funding is real or a myth. It is suspected that the problem for SMEs in Malaysia is not with the availability of funds, but the management of the funds obtained. Hence, this study focuses on the management of receivables, as they constitute a substantive component of company assets. This study centres on the trade credit management practices of Malaysian SMEs in the manufacturing sector, since this sector is a dominant contributor to the Malaysian SMEs’ total output. Specifically, the research objectives are (1) to compile the profile of, and investigate, the trade credit management practices of SMEs in the manufacturing sector; and (2) to identify factors (company characteristics) that might influence the trade credit management practices. To accomplish the research objectives, data on 214 manufacturing SMEs were collected from two different sources. Non-financial data was collected using mail questionnaires while the financial data were obtained from a private credit information agency. Both these primary and secondary data were later matched and used for analysis. First, descriptive analyses were performed to present the profile of practices adopted by SMEs in managing their trade credit. Then, bivariate associative analyses were conducted between the credit management practices and company characteristics using the Mann-Whitney, chi-square, Kruskal-Wallis and Spearman’s rank correlation tests. Next, trade credit management practice variables that showed associations with multiple company characteristics were further analysed as the dependent variables under multivariate settings. Multiple and logistic regressions were used for this purpose. The study provides a broad view of the SMEs’ trade credit management practices and finds them to be not very sophisticated. Thus, the study identifies some aspects that should be addressed to overcome this lack of sophistication. In addition, the study also identifies some of the company characteristics that may have some influence on the SMEs’ credit management practices. The study provides many implications that illustrate the SMEs’ lack of awareness and understanding on the importance of the various credit functions. Therefore, one of the recommendations suggested is to provide training for SMEs to increase knowledge and skills in managing trade credit. The study also proposes the establishment of a cooperative for SMEs, to be initiated and run, either by the SMEs themselves, or one of the related government agencies

Modelling small business failures in Malaysia

Small and medium-sized enterprises (SMEs) are significant contributors to development and growth in an economy.Since SME failure is common, this study develops a failure prediction model for the small and medium-sized enterprises. By using 132 distressed and non-distressed SMEs in Malaysia during the period of 2000 through 2010 based on the logistic regression, the results for Model 1 illustrate that higher gearing and lower profitability are associated with a higher failure risk.In addition, the incorporation of the firm's age as an additional factor in Model 2 significantly improves the model's predictive accuracy.A high area under the receiver operating curve indicates that Model 2 is excellent in discriminating between the distressed and non-distressed SMEs.The Hanley and McNeil test statistic shows that both models could predict failure better than a random model. The overall prediction accuracy rate ranges from 50% to 83% and 75% to 89% for the respective Model 1 and 2 when applied to the l-year, ;?-year, 3-year and 4-year prior to distress holdout samples.Our result indicates that young SMEs rely heavily on debt and they are less efficient which led them into distressed situation. The model can detect failure as early as four years prior to the event. The developed model could be used as a refined tool to avoid possible adverse situations among the small medium-sized enterprises, creditors and investors. To the SMEs, the model could assist in early detection of distress situation; whereas to credit providers the predictors could be included in the score card for better credit decision making. Investors could potentially use the model to assess the financial well-being of companies to safeguard their interests

Predictors of financially distressed small and medium-sized enterprises: A case of Malaysia

This study aims to investigate factors contributing to financial distress among manufacturing SMEs.By employing the logistic regression, we find that age, size, debt ratio, sales to total assets and net income to share capital could predict financially distressed SMEs for the 4-year prior to distress model.However, 3-year prior to distress, more variables, namely age, size, debt ratio, short-term to total liabilities, current ratio and EBIT to total assets, are found to be significant.As companies are nearer to distress situation, less number but important variables emerged.Two year prior to distress, age, debt ratio and EBIT to total assets remained significant while one year prior to distress, only debt ratio could predict financially distressed companies.This ratio is found to be consistently significant in all periods