s. This is associated withprofitability given that it improves corporate efficiency in its use ofworking capital. Deloof (2003), however, posits that low inventory levels,tight trade credit policies and utilizing obtained trade credit as a means offinancing can increase risks of inventory stock-outs, decrease salesstimulants and increase accounts payable costs by forgoing given cashdiscounts. Managers must, therefore, always consider the tradeoffbetween liquidity and profitability when managing working capital. Afaster rise in the cost of higher investment in working capital relative tothe benefits of holding more inventories and/or granting trade credit tocustomers may lead to decrease in corporate profitability. Deloof (2003), Wang (2002), Lazaridis and Tryfonidis (2006), and Gill et al.
全文预览