The Impact of Working Capital Management on Operating Income: An Analytical Study of Industrial Companies Listed on the Palestine Exchange

This study aimed to identify the impact of working capital management on the operating return of industrial companies listed on the Palestine Exchange during the period from 2010 to 2014, totaling 12 companies. To achieve this objective, the impact of the cash conversion cycle, along with its three components, was tested as independent variables on operating income, which served as the dependent variable. Data were collected from the financial reports of the sampled companies. Simple regression analysis was employed to determine the effect of working capital management as a separate variable on operating profit as a dependent variable. The study found several results, including that the average collection period and the cash conversion cycle are significantly related to the operating rate of return, while the average inventory conversion period and the average payment period are insignificantly related to operating income. Based on these findings, the study suggests that industrial Palestinian companies should improve the efficiency of their cash flow management by adopting effective credit policies that reduce the volume of receivables and decrease investment in finished goods inventory. The study also recommends that listed companies explore short-term investment alternatives that can be utilized to achieve profits during periods of recession.