The Importance of Working Capital Management in MNC Expansion Plans

This project examines the critical role of working capital management in the expansion plans of multinational companies (MNCs). The research begins with an introduction to the financial crisis of 2008 and highlights the importance of effective working capital management to avoid financial distress and enable business expansion. The project explores the influence of working capital on MNC operations, the significance of working capital management in the 21st century, and strategies adopted for managing working capital, including conservative, aggressive, and maturity matching approaches. The research methodology includes study settings, research philosophy, approach, design, and data collection and analysis methods. The findings will evaluate the role of working capital in MNCs, the use of various management strategies, and solutions to overcome challenges. The project concludes with recommendations for improving working capital management practices and suggests avenues for future research. The project emphasizes the relationship between working capital management and profitability, addressing how proper management ensures sufficient liquidity, supports daily operations, and facilitates expansion plans.

Running head: RESEARCH 0
WORKING CAPITAL MANAGEMENT
AUGUST 29, 2019
STUDENT DETAILS:

RESEARCH 1
Abstract
This research contains different chapters to systematically complete the research. In the first
chapter, it provides research background, as well as objectives of research and research aims. In
second chapter, it describes influences of working capital upon expansion of operations of
multinational companies. It also describes the impact of job evaluation on human resources
department of the organization. In the third chapter, different philosophies, approaches, and
strategies are discussed to get the objectives as well as aims of research in a systematic manner.
In the fourth chapter, data is analyzed by a researcher through the literature review. In the fourth
chapter, findings are discussed to gain an effective understanding of the research outcome. In the
last, whole findings are summarized and recommended to make further research.

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Contents
Chapter 1: Introduction....................................................................................................................3
1.1 Background of working capital management...................................................................6
1.2 Research questions-................................................................................................................7
1.3 Research aim and objective-.............................................................................................7
Aims and purpose-....................................................................................................................7
Objectives of research-.............................................................................................................7
1.4 Importance of the research................................................................................................8
1.5 Dissertation structure.............................................................................................................9
Introduction..............................................................................................................................9
Literature Review-....................................................................................................................9
Research Methodology-.........................................................................................................10
Data Analysis and findings-...................................................................................................10
Conclusion as well as recommendations-..............................................................................11
2. Chapter 2: Literature review-.....................................................................................................11
2.1 Introduction..........................................................................................................................11
2.2 Working capital in the operations of multinational companies-..........................................11
2.3 Importance of working capital management in expansion plans of MNC in 21st Century. .16
2.4 Strategies adopted in management of working capital in the corporations-........................21
Conservative Strategy.............................................................................................................22
Aggressive strategy................................................................................................................22
Maturity matching or hedging approach-...............................................................................23
2.5 How to overcome the issues or challenges related to the working capital management?...25
2.7 Gap in Literature..................................................................................................................30
2.8 Summary..............................................................................................................................30
3. Chapter 3: Research methodology.........................................................................................31
3.1 Introduction..........................................................................................................................31

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3.2 Study setting.........................................................................................................................32
3.3 Research Philosophy............................................................................................................32
3.4 Research Approach..............................................................................................................35
3.5 Research Design...................................................................................................................38
3.6 Research Strategy.................................................................................................................41
3.7 Data Collection Method.......................................................................................................44
3.8 Sampling Method.................................................................................................................45
3.9 Data Analysis Method..........................................................................................................46
3.10 Ethical Consideration.........................................................................................................47
3.11 Research Plan.....................................................................................................................49
3.12 Strengths and Weaknesses of Research.............................................................................49
3.13 Limitations of the Study-...................................................................................................51
3.14 Suggestions for future research..........................................................................................51
3.15 Conclusion.........................................................................................................................52
Chapter 4: Evaluation of findings..................................................................................................52
4.1 The role of working capital in the multinational companies-..............................................52
4.2 use of various approaches or strategies of the working capital management in the
multinational companies-...........................................................................................................54
4.3 solutions to overcome the issues or challenges faced in managing working capital by
companies-.................................................................................................................................55
Chapter 5: Conclusion and recommendations-..............................................................................57
5.1 Conclusion...........................................................................................................................57
Role of the working capital in the multinational companies-................................................57
Various approaches or strategies of the working capital management in the multinational
companies...............................................................................................................................58
Different methods to assess and end the challenges faced by multinational companies in
managing the working capital-...............................................................................................59
5.2 Recommendations................................................................................................................60
6. References..............................................................................................................................62

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Chapter 1: Introduction
The financial disaster took place in 2018. Various economists consider this financial disaster as
the most severe financial disaster since the great stress of year 1930. The main element of the
financial disaster 2008 was that the American banks did not handle working capital properly.
These banks of USA were included in risky dealings. They were engaged in the trading of the
hedge funds with derivatives. Subsequently, these USA banks required more mortgage for
supporting the profitable selling of the derivatives. In addition, sometimes it can hear that the
multinational corporations go in substantial debt, as well as began to liquidate the assets for
covering the enhancing debts, in this circumstance the working capital management plays vital
role where this may rescue the corporations from going in the unrecoverable stages. In the above
statements, it is discussed that what might happen if working capital is not managed efficiently.
However, other benefits of efficient working capital management may assist the corporation in
the functioning at the business level and enable it to expand its business. It is not always that
working capital only helps a company to avoid unwanted dwindling in the business but also
helps a company to improve its competitiveness and emerge the plans in the channel (Bacchetta
and Benhima 2015).
Further, it is important to know that what liquidity crisis is. The liquidity crisis is the adverse
financial condition featured by the deficiency of the cash flows. For the individual business, the
liquidity crisis takes place while the otherwise solvent businesses do not have the liquid
assets such as cash, necessary to meet short-term obligation, such as repayment of loans,
payment of bills as well as make the payment to workers. In a case when the liquidity crisis is
not recovered, then corporation should announce the bankruptcy. The bankrupt business may

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have the liquidity crisis, however in this situation; restoring the cash flows would not end final
insolvency of company.
Furthermore, it is required to assess the significance of working capital management in
expansion plans of MNCs in twenty first Century. The main question is what are the reasons for
which the working capital management is significant? Working capital is one of the main
components for running company nowadays, in a case when company has good sales as well as
high margin as well as may not collect money to purchase materials, make the payment of salary,
along with make payment of dividend to shareholders, then company would face tougher time
and the business may breakdown. The working capital is part of corporation’s total assets. In
general, these are differences between current liabilities and current assets. In general, term, this
is daily, weekly as well as monthly need of cash for the functions related to the business. As a
result, the working capital management is the procedure to handle short-term liabilities as well as
assets. It ensures the sufficient liquidity of company for running the operations in smooth way
(Rugman and Nguyen 2014). In the following parts, it will be discussed that how the working
capital may influence the achievement along with failure of the enlargement of plans as well as
level of accomplishment.
Further, working capital management is significant elements of Corporate Financial
Management. It is considered as relationship amid current liabilities and assets (Charles Jr,
Schmidheiny and Watts 2017). The working capital management is so essential to carry daily
routine of organisation. A motive behind working capital management is for making sure
continuousness in functions of the company and that this has proper fund for achieving maturing
short-term debts as well as upcoming functional expenses. It majorly includes the inventory
management, management of accounts payables, management of cash, as well as the

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management of accounts receivables. The fundamental context of better organisation of working
capital management is for rendering proper help for running the functions as well as business in
the smooth way along with effective manner. In addition of this, the working capital is very
important for meeting daily operating expenditures and for maintain the security for WIP
inventories, spare part, consumables, raw materials, along with the finished goods, and books
debt (such as balance of debtors along with the balance of bills receivables).
For holding the secured stock of raw materials, consumables as well as spare parts to make able
the unallocated functions at all the period. For permitting, the correct credit without influencing
the order of clients and without discovering the company to the risk of cash losses. In addition,
for holding the proper cash balance every time for fulfilling the obligations of the companies
from selling as well as allocating the expenditures, tax, business, offices as well as
organisational. While company keep proper working capital, this level to operate daily
operations will be easy to think in enlargement of plans as well as to open more production lines
or buy other corporation or open new branches everywhere in the world. In a case when
corporation does not make investment of the proper funds in current assets, it may be in danger
of being illiquid and it will mislay profitability, as this did not invest idle fixed assets will not get
something. That is why adequate trade-off should be attained amid liquidity as well as
profitability. The working capital decision is essentially needed for making plan as well as for
controlling the flows of dollars amongst numerous accounts related to the working capital, along
with other balance sheet statements for making sure the proper liquidity for the company (Bace
2016). In this way, it is required that the financial manger should decide the best level of current
asset to manage working capital of company.

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Working capital management and profitability have some relations. Many research works are
available on the relation in different sectors. The working capital management is so important
part of business activities of any firms. The working capital management is very important for all
the sectors (Ben-Nasr, 2016). The major objective of the study is to search “Does the working
capital management have influence upon the profitability of the multinational companies?” and
also the aim of this study is to contribute significant aspects towards the financial management
known as working capital management with references to the multinational companies. The
remaining study is depended on analysis of previous literature review that is relevant to the
matter that provides the information about theoretical context for the paper, research
methodology that provides the information about all variables involved in paper and sample size.
The remaining section states empirical analysis as well as regression outcomes related to the
study, and renders suggestion in relation to issue of research.
1.1 Background of working capital management
The Working capital management means to an administration of elements of working capital.
The elements of working capital include the marketable securities, cash, account receivable
(debtors), inventories (stocks) as well as account payables (creditors). The financial manager is
required to decide the level along with composition of current assets. For better management of
working capital, it is required to ensure that the right sources are selected for financing the
current liabilities along with the current assets are paid timely. Various features of working
capital management create many significant operations of the financial managers.

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1.2 Research questions-
Following are research questions-
1. What is role of working capital in expansion of operations of multinational companies?
2. How the working capital is significant in expansion of plans of multinational companies
in twenty first century?
3. What are the strategies adopted in management of working capital in corporations?
4. How multinational corporations can overcome the challenges and problems of thee
working capital management?
1.3 Aim and objective of research-
Aims and purpose-
A research aim is to know a role of working capital in the expansion plan of the multinational
companies in twenty first century by knowing about the businesses of the multinational
corporations. As per the final findings of research study, influence of the working capital of
expansion plan would be defined and following the finding recommendations would be rendered
such that proper measures may be taken to improve use of working capital in respect of
appropriate expansion of operations of the multinational company (Tran, Abbott and Jin Yap,
2017).
Objective of research-
The objectives of research are discussed below-

RESEARCH 9
● To explore impact of working capital capital in an expansion of plans of multinational
companies
● To explore the way of conduction proper management of the working capital of the
multinational corporations
● For discovering strategies or approaches adopted in management of working capital in
multinational corporations
● For rendering proper ways to overcome the issues or challenges faced by the
multinational corporations in the management of working capital.
1.4 Importance of research
The research is significant because in the today’s world of sustainability. It is also significant for
the proper financial performance of the multinational companies, as it is important since it
decides the upcoming development along with impacts of working capital management on
expansion of the operations of multinational corporations. The elements that are accountable for
these mentioned factors shares connection with the working capital; along with it is essential to
search the influence of working capital on the elements such that the greatness of the
significance of the working capital on the expansion of the operations of the multinational
corporations. In addition, this research is beneficial for examiner to gain the understanding
regarding the strategies or approaches of management of working capital of multinational
corporations to expand operations as well as the plans. This research is also significant for the
management of multinational corporations to determine an impact of the proper working capital
management on an organization. It could be also effective for multinational corporations to

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understand the different solutions to overcome the issues or challenges related to the working
capital management on organizations.
1.5 Dissertation structure
The structure of research is utilised for meeting the research in the methodological manner. The
adopted structure for conducting the research is discussed below-
Introduction
The introduction chapter is considered as first chapter of research paper. An introduction chapter
would entail topic of the research, background data, aim of research and research objectives, and
significance of study as well as research question to develop the healthy as well as the
knowledge based related research problem or issue. The introduction chapter also involves the
best understanding in relation to the research limitations that are faced by researcher at the time
of conducting research. In this way, the introduction chapter is useful for the examiner to attain
proper guidance of study. Therefore, the I will be able to explore the research matter in the
proper way.
Literature Review-
This is next chapter of this paper to define research issues by applying different concepts,
theories, as well as methods. By literature review, I would be capable to have the proper
evaluation of present data regarding research issues as well as know that at what level, this has
been explored until the date. For the chapter of literature review, the wider range of online
books, online journals along with articles are reviewed as they are helpful to develop the
conceptual knowledge regarding the topic of research ‘impacts of the working capital
management on expansion of operations of the multinational corporations’. It is also useful for

RESEARCH 11
investigator to have knowledge of gap of information and develop the basis to implement the
secondary research techniques (Singh, Kumar and Colombage, 2017).
Research Methodology-
In the next chapter, different methods as well as the approaches are discussed to conduct the
research study in the ethical as well as methodological way. In the addition of this, different
research approaches, research philosophies, research strategies, the data collection method, data
analysis method, sampling methods along with the research design is defined as well as validated
to make sure the dependability as well as rationality of results research. Additionally, techniques
of research are justified according to the research objectives along with the topic, as it is
important to get the proper results and outcomes. This study is depended on the secondary data
collection method. In the paper, the reader would see different working capital management
practices and its influence upon the profitability of multinational companies of different sectors
in the previous periods. These data for this research study is gathered by taking assistance of the
non-survey method (Kumar, 2019). This is because that the accounting data needed for this study
is simply accessible from the published annual report as well as accounts from the various
government websites as well as the reports. In according to this, related statements like balance
sheet along with profit and loss items, such as Return on Assets, Average Collection Period,
Inventory Conversion Period, Cash Conversion Cycle, Current Ratio Average Collection Period,
Debt to equity Ratio, as well as the size of corporation of sampled companies are the variable to
be learned in this study. In order to assess profitability control of variables is conducted. It is
made by utilising various formulas that are stated.