The Empirical Analysis Of The Correlation Between Working Capital Management And Business Performance

With the development of the global manufacturing industry gradually slowed down, China’s machinery manufacturing industry has entered a period of slow growth. Machinery, equipment, instrumentation industry as one of the sub sectors of manufacturing industry, the pressure is becoming even greater with the slow development of the economy, competition between enterprises becomes more intense, extreme measures were taken by enterprises to pursuit sales, performance of the majority businesses appeared different degree of decline, it will stretch the financial situation of enterprises. Working capital management as one of the most important part of enterprise financial management, no matter in theory, or in practice, has been paid more and more attention. But early researches on working capital management mainly focus on single factor study, for example, how to determine the optimal cash holdings, using the inventory turnover ratio, accounts receivable turnover ratio of accounts payable to measure enterprise inventory, accounts payable management efficiency. But the elements of working capital are not independent, to adjust or control a factor will affect the other elements. Just relying on adjusting a working capital factor to improve the efficiency of enterprise capital management is unable to realize. Preliminary research on working capital management has not broken through the traditional enterprise boundary. Professor Wang Zhuquan (2007) indicated that working capital would be divided into business and financial working capital, business working capital would be divided into purchasing channel working capital, producting channel working capital and marketing channel working capital. This method breaks through the original enterprise boundary, The research of working capital is focused on the supply chain, working capital is combined with business processes. And the research also puts forward the index of working capital turnover efficiency.This paper is on based of the concept of working capital and the classification of working capital above. Channel management is innovatly introduced to the study of the correlation between the efficiency of working capital management and business performance. And the study is divided into two sections, the first part is to analyze the influencing factors of working capital management efficiency respectively from the view of elements and business process by the means of normative analysis and empirical analysis. The second is an empirical study on the relationship between the channel working capital turnover efficiency and business performance. And finally, the paper puts forward relevant measures and suggestions to improve the performance of the business on the basis of the results of the two researches above. The first part of our study is a comprehensive review of outcomes of previous scholars, then define the concept of working capital in our study. The second part is to analyze the factors of influencing the efficiency of working capital management of each channel separately from the perspective of factors and business process. Factor perspective analysis is normative analysis, and business process perspective is empirical analysis. Based on the figures of 2013 China’s machinery, equipment, instrumentation industry listing corporations, the main idea is to study whether a correlation exists between the business process management and the channel working capital management efficiency. And the conclusion shows that there is a negative correlation between the accounts payable management level, the concentration degree of supplier and purchasing channel working capital turnover; a positive relationship between product management level and the working capital turnover of producting channel; a negative correlation between accounts receivable management level, concentration of customers and working capital turnover of marketing channel. With the data of 2009-2013 years of China’s machinery, equipment, instrumentation industry listing corporation as the study sample, the third part is to analyze the correlation between the working capital management efficiency of channels and business performance. And the result shows that purchasing channel, producting channel, marketing channel working capital turnover are negatively correlated with the business performance, it means that shortening the working capital turnover are conducive to improve business performance. Based on the results of empirical research, the last part of our study is to put forward the effective measures to improve business performance from a comprehensive perspective of factors and business process.