The Impact of Working Capital Policies on The Profitability of Companies: Evidence from Jordan

Abstract

The purpose of this study is to examine the relationship between working capital policies and profitability of Jordanian companies listed in Amman Stock Exchange for the 10 years period from 2003-2012 which comprises of (69) companies was finally used as sample size, The effect of working capital policies have been studies including investment Policy, Financing Policy, and firms size, sale growth as controls variables on the return of assets (ROA) and Tobin’s q as a measures of profitability for Jordanian companies, Panel data methodology was adopted because it combined time series and cross sectional data. The method of analysis is correlations and multiple regression analysis; the result showed that Aggressive investment Policy has positive negative and significant relationship with return on assets (ROA),but negaive and significant relationship with Tobin’s q, The result showed that Conservative Finacing Policy has positive and significant relationship with rirm’s profitability, while firm size and sale growth showed positive and significatnt relationship with firm’s profitability, the study recommended that Jordanian Companies must adapt working capital investment and financing policies while, keeping in view the trade-off between liquidity and profitability.