Efficient working capital management is crucial for enhancing the performance of a firm. This involves effective management of cash, inventory, and receivables. The present study empirically examines how working capital management influences the firm performance of 403 Slovak companies coming from the furniture industry over the period of 2015–2022. We utilized a quantitative approach using static and dynamic techniques for panel data analysis. Our findings confirm that there is a relationship between the components of working capital management and firm financial performance. Firms become more efficient through the accelerated turnover of inventory and the more expeditious collection of payments from their customers, thus promoting an aggressive working capital policy. The results of the two-stage dynamic GMM estimates confirm that the lagged dependent variable return on assets was statistically significantly and positively associated, which confirms the process of dynamic adjustment and the lagged effect. The findings suggest enhancing profitability through the proposal and implementation of effective working capital policies.
Levický et al. (Tue,) studied this question.