Exploring the Interplay Between Current Ratio, Working Capital Management, and Roa: A Literature Review of Retail Enterprises

This paper provides a comprehensive review of the recent literature on the relationship between current ratio, working capital management (WCM), and return on assets (ROA) in the context of retail enterprises. Liquidity management, as measured by the current ratio, is a critical determinant of a firm's short-term solvency and operational resilience, while WCM—encompassing the management of inventory days, receivable days, and payable days—ensures the efficient utilization of current assets to enhance profitability. By synthesizing studies published between 2020 and 2025, this review emphasizes that maintaining an optimal current ratio (typically between 1.3 and 1.7) and optimizing WCM practices have a significant positive influence on ROA. It also discusses empirical evidence demonstrating that WCM often mediates the impact of liquidity on profitability by improving cash flow efficiency and reducing capital tied up in operations. Furthermore, this paper identifies research gaps, such as limited sector-specific studies and a lack of integration of digital transformation factors. It concludes by suggesting future research directions that explore the combined effect of AI-based forecasting, ERP systems, and data-driven liquidity strategies on financial performance within the retail sector.