Working capital management practices and earnings per share of manufacturing companies in Nepal

Abstract

The main objective of this study is to study what influence does the components of working capital like Current Ratio, Quick Ration, Inventory Turnover, Average Receivable Period and Average Payment Period has on Earnings Per Share. This study is done to examine the Working Capital Management practices and Earnings Per Share of manufacturing companies in Nepal. In this study, quantitative research design has been implemented using secondary data of eight NEPSE listed manufacturing companies for over a twelve-year period. The statistical tools like Descriptive statistics, correlation analysis, and regression analysis has been used to analyze the influence of working capital management on Earnings Per Share of the companies. The findings of correlation analysis imply that the companies which take longer time to pay the suppliers tend to have a higher Earnings Per Share. Hence, Average Payment Period show a significant impact on EPS. The results of regression show that Average Receivable Period and Average Payment Period are the only variables that has significant impact on Earnings Per Share amongst all variables. The overall findings of the study show that if the management of components of working capital is efficient the Earnings Per Share of the company is enhanced. The study recommends that managers focus optimizing the working capital cycle especially by reducing inventory holding period and improving receivables collection efficiency to strengthen firm value.