Impact of Working Capital Management of Meghna Cement Mills

Year ROA (Y) CR (X)
2011 0.016194111 0.863297402
2012 0.033887148 1.068455345
2013 0.042710483 0.966790029
2014 0.025618899 0.900124304
2015 0.014877783 0.842042677
2016 0.008446397 0.85202148
2017 0.022208234 0.899496388
2018 0.009809894 0.941781277
2019 0.008896515 0.701987013
2020 0.005041183 0.753731879
2021 0.005730461 0.71583861
Impact of Working Capital Management of Meghna Cement Mills
Ltd.’s profitability
Working capital management is a critical component that has a direct impact on a company's profitability.
The profitability of a company and its working capital efficiency have a strong linear connection.
Working capital management guarantees that the company's profitability is enhanced. Working capital
management is critical since it has a substantial impact on a company's profitability and, as a result, its
capacity to compete. The capacity of financial managers to manage receivables, inventory, and payables
effectively and efficiently has a substantial impact on the business's success and profitability. For starters,
a large investment in inventory and receivables is linked to poor financial performance, as measured by
Return on Assets (ROA), implying that a reduction in the number of days a company gets payment from
sales has a beneficial impact on its profitability. Second, there is a highly substantial positive association
between average payment duration and profitability, which means that the longer a company pays its
debtors, the more successful it is. Finally, when the cash conversion cycle shortens, the firm's profitability
rises, and management may generate positive value for shareholders. Higher returns on assets derive from
a shorter cash conversion cycle.
Return on equity, Return on assets, Current ratio and Inventory turnover ratios are the variables employed
here over a period of eleven years, from 2011 to 2021. The data was subjected to regression analysis. The
tests for normality and linearity were also used. The results were overwhelmingly favorable. The T-test is
used to determine the significance of individual variables; it indicates whether each variable is significant.
Working capital management, it is found, has a positive substantial influence on business profitability.
Impact of Current Ratio on Profitability
0 0.01 0.01 0.02 0.02 0.03 0.03 0.04 0.04 0.05
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Year ROE (Y) CR (X)
2011 0.0984586 0.863297402
2012 0.1858211 1.068455345
2013 0.2383824 0.966790029
2014 0.1240526 0.900124304
2015 0.0844675 0.842042677
2016 0.0484779 0.85202148
2017 0.1258357 0.899496388
2018 0.0901095 0.941781277
2019 0.087908 0.701987013
2020 0.0614252 0.753731879
2021 0.0388622 0.71583861
SUMMARYOUTPUT
RegressionStatistics
Multiple R 0.77252395
RSquare 0.596793253
AdjustedRSquare0.551992503
StandardError0.008223724
Observations 11
ANOVA
df SS MS F Significance F
Regression 1 0.000900898 0.0009009 13.321055 0.005319164
Residual 9 0.000608667 6.763E-05
Total 10 0.001509565
Coefficients StandardError t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept -0.057 0.020498977 -2.765217 0.0219243 -0.10305603 -0.010312 -0.10305603 -0.010312214
CR(X) 0.086 0.02354758 3.6498021 0.0053192 0.032675679 0.1392123 0.032675679 0.139212332
ROA=-0.057+.086(CR)
Here coefficient between ROA (Return on Asset) and CR (Current Ratio) is positive.
That means there exist a positive relationship between CR and ROA over time. The
regression equation between CR and ROA can be written as per by following
equation:
ROA= -0.057+.086(CR)
Here CR is independent variable and ROA is dependent variable. This equation
indicates that an increase of 1 in current ratio will cause an increase by 8.6% in
Return on Assets (ROA)
Besides, coefficients of determination (R2) are 59.68%, that means 59.68% changes
in ROA can be explained by changing CR.
0 0.05 0.1 0.15 0.2 0.25 0.3
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SUMMARYOUTPUT
Regression Statistics
Multiple R 0.7448501
RSquare 0.5548017
AdjustedRSquare0.5053352
StandardError0.0418998
Observations 11
ANOVA
df SS MS F Significance F
Regression 1 0.019690236 0.0196902 11.21571 0.00853729
Residual 9 0.015800348 0.0017556
Total 10 0.035490584
Coefficients StandardError t Stat P-value Lower 95% Upper 95% Lower95.0% Upper 95.0%
Intercept -0.240 0.104442133 -2.293986 0.0474641 -0.475853314 -0.003324 -0.475853314 -0.003324274
CR(X) 0.402 0.119974741 3.3489864 0.0085373 0.130392053 0.6731955 0.130392053 0.673195494
ROE=-0.240+.402(CR)
Here coefficient between ROE (Return on Equity) and CR (Current Ratio) is also
positive. That means there also exist a positive relationship between CR and ROE
over time. The regression equation between CR and ROE can be written as per by
following equation:
ROE= -0.240 + 0.402(CR)
Here CR is independent variable and ROE is dependent variable. This equation
indicates that an increase of 1 in current ratio will cause an increase by 40.2% in
Return on Equity (ROE). That means higher current ratio (Current Assets are greater
than Current Liabilities) increase the profitability of Meghna Cement.
Moreover, coefficient of determination (R2) is 55.48% that means 55.48% changes
in ROE can be explained by changing CR.

Year ROA (Y) ACP (X)
2011 0.016194111 46.9001305
2012 0.033887148 56.43803179
2013 0.042710483 55.11487166
2014 0.025618899 60.26317739
2015 0.014877783 87.03616561
2016 0.008446397 76.31319217
2017 0.022208234 133.5076231
2018 0.009809894 61.23622477
2019 0.008896515 81.76361124
2020 0.005041183 65.56487427
2021 0.005730461 82.51624967
Impact of Average Collection Period (ACP) on Profitability
SUMMARYOUTPUT
RegressionStatistics
Multiple R 0.197675217
RSquare 0.039075491
AdjustedRSquare-0.067693899
StandardError0.012695484
Observations 11
ANOVA
df SS MS F Significance F
Regression 1 5.8987E-05 5.899E-05 0.3659803 0.560145327
Residual 9 0.001450578 0.0001612
Total 10 0.001509565
Coefficients StandardError t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 0.025 0.012946364 1.9361144 0.0848365 -0.004221068 0.0543524 -0.00422107 0.054352351
ACP(X) -0.000102 0.000168651 -0.604963 0.5601453 -0.000483542 0.0002795 -0.00048354 0.000279487
ROA=0.025-.000102(ACP)
Here coefficient between ROA (Return on Assets) and ACP is negative. That means
there exist a negative relationship between ACP and ROA over time. The regression
equation between ACP and ROA can be written as per by following equation:
ROA= 0.025 + (-0.000102) ACP
This equation indicates that an increase of 1 in ACP will cause a decrease by
0.010% in Return on Assets (ROA). This increase in ACP hampers the overall
profitability of Meghna Cement.
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