Working Capital Management: A Catalyst for Profitability in Bangladesh's Textile Sector

This study investigates the impact of working capital management (WCM) on the profitability of firms in Bangladesh’s textile sector. Utilizing panel data from 21 publicly listed textile companies over the period 2017–2021, the research examines the relationship between key WCM components, inventory turnover, accounts receivable, accounts payable, and the cash conversion cycle (CCC) and firm profitability, measured by return on assets (ROA). The empirical findings reveal a statistically significant negative correlation between ROA and both the inventory conversion period and the CCC, underscoring the critical role of efficient inventory management and working capital efficiency in enhancing profitability. Furthermore, firm size exhibits a positive association with ROA, suggesting the benefits of economies of scale. In contrast, variables such as receivables, payables, and liquidity ratios demonstrate no significant influence on profitability. The study provides valuable insights for corporate managers and policymakers, emphasizing the importance of optimizing inventory management and leveraging firm size to improve financial performance. These findings contribute to the broader discourse on operational efficiency and have strategic implications for fostering sustainable growth in Bangladesh’s textile industry.