Investigation the Effects of Working Capital Management and Capital Structure on Profitability and Return on Assets (Case Study: A Selection from the Automotive Companies in Iran)

Full development and advance of working capital management may have effective contribution in creating the value of companies. The purpose of this research is to provide empirical evidence about the effects of working capital management on viability of sample of listed automotive companies in the Tehran Stock Exchange. Data used in the study are given from financial statements of listed companies in stock during the years 2006 to 2010. In this study, three models are used. To investigate the effect of leverage degree (financial and operational), firm size and liquidity on profitability of companies the first model, the effect of inventory turnover on return on assets the second model and the effect of cash conversion cycle on return on assets of companies the third model is estimated. Results from the first model estimation indicate that all studied variables have significant and positive effect on the profitability index of companies. The second and third model estimation also showed that inventory turnover and cash conversion cycle have significant and negative effect on the returns on assets.