engleski

Analysis of conservative and aggressive working capital management strategy through different industries

A company may pursue a conservative or aggressive working capital management strategy. A conservative strategy of working capital management implies higher investments in working capital and a high level of liquidity, where one can expect less risk, but also lower profitability. An aggressive strategy of working capital management implies less investment in current assets, where higher profitability is expected, but also higher risk. Companies with a shorter cash conversion cycle will pursue a more aggressive working capital management policy because they can accept higher risk while companies with a longer cash conversion cycle will pursue a more conservative working capital management policy. The main goal of this paper is to analyse the working capital management strategies of Croatian small and medium enterprises through four industries. Three specific goals have been set: The first goal is to establish which working capital management strategy Croatian small and medium-sized enterprises use. The second goal is to determine whether there are differences in working capital management strategy between different industries. The third goal is to analyse the cash conversion cycle in the observed industries. The sample of data includes 276 small and medium enterprises of four industries that make up the largest share in the total number of employees. It will observe a six-year time period (2010-2015). In order to achieve the set goals, descriptive statistics will be made for all variables. Using financial analysis techniques, the authors will calculate the cash conversion cycle and analyse it in the observed industries. The assumption is that the observed companies are implementing a conservative working capital management strategy, which is typical for companies operating in posttransition countries, characterized by less developed markets and an uncertain business environment. Industries with a shorter cash conversion cycle are expected to pursue a more aggressive working capital management policy, and vice versa.

conservative strategy ; aggressive strategy ; cash conversion cycle ; working capital

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