Effect of Firm Characteristics on Working Capital Management of Manufacturing Firms in Amhara Ethiopia

Research studies on the determinates of working capital management in developing countries especially in Ethiopia remained untouched area of empirical research. Thus the fundamental objective of this study is to examined the effect of f irm characteristics on Working Capital management by using audited f inancial statements of 11 Share Manufacturing Company out of 16 targeted population in Amhara National Regional State (ANRS), Ethiopia for the period of 2002-2006E.c. Those which have f ive year full annual audited f inancial data were selected in the sampling. The study Used Working Capital Management as dependent variable and f irm Characteristics (prof itability, size of the f irm, current ratio, operating cash flow, sales growth, and debt ratio/Leverage) are used as independent variable. Cash Conversion Cycle is used as a measure of dependent variable (Working Capital Management). Empirically examined the effect of f irm characteristics on working capital management and the data of 11 companies from 16 targeted share manufacturing companies which are found in ANRS were analyzed using descriptive statistics and pooled OLS multiple linear regression analysis. Data were collected from there audited f inancial statement reports of the available f irms for the period 2002-2006E.c. The data was analyzed using STATA Version12, pooled OLS Regression analysis Method was employed. The results indicates that there is a signif icant negative impact of operating cash flow on cash conversion cycle which is a comprehensive measure of working capital management. The result also shows that there is t signif icant positive impact of sales growth on cash conversion cycle. And there is no signif icant effect of variables like Size, Return on Asset, Current Ratio, Debt ratio, on cash conversion cycle. The results conclude that sales growth and operating cash flow have signif icant impact on cash conversion cycle.