Investigating Relationship Between Working Capital Management and Shareholder's Wealth: Evidence from USA

Over the past few decades, there have been major developments in capital management and wealth creation, yet the relationship between them is not clear. This study attempts to fill this gap by examining the relationship between working capital management and shareholder wealth for Dow Jones Index in USA for the period 2014 to 2023. Return on Invested Capital (ROC) and Return on Average Common Equity (ROE) was used as an indicator for shareholder wealth whereas, Average Inventory Days, Receivables Collection Days, and Inventory Turnover were used as indicator for working capital management. The key findings suggest that there is a strong relationship between inventory days and return on invested capital. Significant positive relationship between cash conversion cycle and return on equity, significant relationship between inventory turnover and return on equity. Recommendations include optimizing working capital techniques, balancing capital usage, and monitoring key metrics for enhanced profitability and shareholder value. Regular analysis of working capital components is crucial for informed decision- making.