A Comparison of Working Capital Management of Chemical and Medicine Listed Companies in Tehran Stock Exchange

Abstract

The main objective of the current study is comparing working capital management of two groups of listed companies in Tehran Stock Exchange. The results show that, in medicine industry compared to chemical industry, debt ratio makes more impact on reduction of net liquidity. But examination of impact of LEV over WCR indicate that, in chemical industry, debt ratio makes more impact on There is a great emphasis on the importance of working capital management in recent years and a great part of the decisions of financial managers relate to that. That's because management of working capital influences the firm's profits and thus its market value. In order to realize a proper management of working capital, the managers should create a balance between risk and return. Based on the theory of Risk and Return, the more a firm holds net working capital, the less risk faces the firm, and instead the firm's returns will also decrease. The opposite is also true. Companies that hold less liquidity face a great risk. Therefore creating a correspondence between risk and capital return bears a great significance. The company's ability in handling its operations over a long period depends on how the company manages its working capital. Therefore the manager's capability in making a balance between the company's risk and return plays a major role in persistence or failure of company's activities.

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