The Role of Working Capital Management in Corporate Profitability (An Analytical Study of a Sample of Industrial Companies Listed on the Iraqi Stock Exchange 2018-2022)

Abstract

     This study examines the impact of working capital management on the profitability of industrial companies listed on the Iraq Stock Exchange during 2018–2022. Working capital management (independent variable) is operationalized through liquidity management (LM), inventory management (IM), and short-term debt management (STDM). Profitability (dependent variable) is measured by net profit margin (NPM) and return on assets (ROA). The population comprises all listed industrial firms over the period, with eleven companies selected based on complete financial data availability. A quantitative analytical approach is employed using actual firm financials, and statistical analyses are conducted in EViews to test the relationships between the independent and dependent variables over time. The findings show that working capital management explains 38.4% of the variation in NPM and 52.4% of the variation in ROA—an economically meaningful effect given the many other factors influencing profitability. The study recommends that industrial firms undertake a comprehensive review of inventory management—particularly the cost of goods sold (COGS)—by eliminating unnecessary costs and restructuring production processes. Because COGS and net profit are inversely related, reducing COGS can directly improve profitability.