RETURN ON CURRENT ASSETS, WORKING CAPITAL AND REQUIRED RATE OF RETURN ON EQUITY
Journal Title: e-Finanse - Year 2014, Vol 10, Issue 2
Abstract
The problem of return on current assets and return on working capital related to the cost of equity invested in a company is analyzed in this paper. Risk – return and liquidity – profitability trade-offs influence the company’s equilibrium and management decisions. Liquidity is measured by the cash conversion cycle and it is related to the working capital strategy, measured by current ratio. Rate of return on current assets should be related to the rate of return on working capital that is linked to the cost of capital and the required rate of return. The results indicate that there is a positive relationship between the return on current assets and cash conversion cycle, a positive relationship between cost of equity and return on working capital meaning that the working capital, cash conversion cycle and current assets management are related to profitability, and cost of equity is determined by the required rate of return calculated based on the Capital Asset Pricing Model.
Authors and Affiliations
Monika Bolek
Keywords
Related Articles
- EP ID EP105259
- DOI -
- Views 114
- Downloads 0
Financialization and commodity market stability
Stability in supply of commodities is essential for manufacturing and doing business. This fact is unchangeable despite the passage of time and only the ways of trading of commodities differ. Especially in recent decades...
Selection and assortment of the variables describing the relationship between the economy and the general government sector size by application of the LEM2 algorithm
This paper reverses the relatively frequent examined interrelation that links an impact of the public sector (and within it the general government sector) on the economy of the analyzed countries. The article analyses wh...
CAPITALIZATION AND BANK PERFORMANCE: EVIDENCE FROM NIGERIAN BANKING SECTOR
The study examines the impact of capitalization on bank performance of some selected commercial banks in Nigeria using econometric analysis on annual time series data of ten banks over the period of 2006 to 2014. The res...
LOCAL TAXES AND FEES AS A SOURCE OF REVENUE FOR POLISH MUNICIPALITIES: SUBSTITUTES OR COMPLEMENTS?
The main purpose of this article is analysis of the relationship between local tax and fee policies in Poland. We argue that local authorities have similar and significant discretion over tax and fee policy and, therefor...
THE EFFECT OF AN ELECTRONIC EXCHANGE ON PRICES AND RETURN VOLATILITY IN THE FINE WINE MARKET
Fine wine has become an attractive alternative asset class in recent decades. In our study, we take the market microstructural perspective and verify how innovations in trading infrastructure affect the fine wine market....