Extent of Impacts of Working Capital Management on profitability of Local Banks in Iraq

Abstract

This study investigated the relationship between working capital management and profitability of local banks in Iraq. The working capital management was determined using Cash Ratio (CR) while profitability of the banks was determined using Return on Equity (ROE) and Return on Assets (ROA). The sample for the study was five local banks listed in Iraqi Stock Exchange (ISX) and the secondary data used for the study was derived from five years (2015-2019) financial statements of the five sampled banks. Data study was analysed using descriptive analysis of mean and standard deviation. Also, correlation matrix was used to determine the relationship between working capital management and profitability of local banks in Iraq. Regression analysis was carried out to determine the contribution of working capital management on profitability of local banks in Iraq. The analyses were carried out using SPSS 2.0. The finding of the study revealed that working capital management has a positive relationship with profitability. The study concluded that working capital management significantly predicted the profitability of local banks in Iraq. The study recommended, among other things, that local banks in Iraq should hire or employ qualified, competent and professional workers that can help them to reasonable decisions that can lead to maximization of profits. Local banks in Iraq should identify the factors that facilitate effective management of working capital and use the factors to determine the achievement of profitability of the banks.