1st ICARE Student's Conference - 2015

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Adoption of information technology to productivity changes in the Sri Lankan banking industry
(Department of Accountancy, University of Kelaniya, 2015) Fernando, P.
The rapidly increasing use of computers in producing and delivering goods and services has spurred a large literature on the effects of information technologies (IT) on productivity growth (Casolaro & Gobbi, 2004). Information and communication technology (ICT) can be considered the key factor driving economic growth in industrial societies. Investing in IT is widely regarded as having enormous potential for reducing costs, enhancing productivity, and improving living standards (Hajl, Sims, & Ibragimov, 2013). In recent years, greater competition in SL banking has been driven by technological change, internationalization and globalization of financial services, higher demand for banking services and deregulation and privatization of the industry (Figueira, Nellis, & Parker, 2009). The Internet has provided an environment in which information can travel across organizational and geographical boundaries (Dasgupta, Sarkis, & Talluri, 1999). Comparison of ICT investment to all other expenditures connected with the production process illustrates the growing significance of ICT in the modern economy as a factor of production (Hajl, Sims, & Ibragimov, 2013). The purpose this research is to observe whether Information technology is an indicator of a poductivity. The sample for this research will be obtained from the Sri Lankan listed commercial banks. The objective of this research is to findout to identify relationship between information technology and productivity changes.
Affect of internal audit on firms performance
(Department of Accountancy, University of Kelaniya, 2015) Dissanayake, W.G.P.K.
This study attempt to evaluate the relationships between the internal audits characteristics such as professional qualifications of the chief audit executive of the Internal Audit, size, experience, and qualification; and firm performance. The internal audit is deemed as the core of business accounting as it is the section that keeps track of all businesses associated with the sector. The Objective of this research to identify relationship between Internal Audit and Performance of Sri Lankan Organizations. The internal audit efficiency assists in developing the company’s work because the financial reports present the internal audit department’s quality. In addition, an internal audit is a crucial part of corporate governance structure in an organization and corporate governance covers the activities of oversight conducted by the board of directors and audit committees to ensure credible financial reporting process. This study provides comprehensive oversights on the relationship between internal audit and firm performance.
Application of Sri Lanka accounting standards in small & medium sized enterprises
(Department of Accountancy, University of Kelaniya, 2015) Nishanthi, W.P.L.
Small and Medium Enterprises (SMEs) play an important role in both developed countries and developing countries. It contributes to the growth of the economy through employment generation, new venture development and by opening up new avenues for the growth in the economy. The Central Bank of Sri Lanka (1998) had stated that inadequate capital, inadequate institutional credit facilities, use of outdated technology, improper accounting techniques, inadequate sales promotion competencies and inattentiveness of small businesses are the main problems faced by the small businesses in Sri Lanka. Huck and McEwen (1991) argue that 12 competency areas such as starting a business, planning and budgeting, management, marketing/selling, advertising and sales promotion, merchandising and finance and accounting is needed for small business success. This study is done in relation to the factors leading to non-compliance with Standard accounting practices by the small and medium scale enterprises (SMEs) in Sri Lanka. The main objectives of the study focused on identifying the nature of the accounting practices and the factors leading to non-compliance with standard accounting practices by the SMEs. Efforts are made to examine the possible causes for noncompliance with the Standard accounting practices by the SMEs in Sri Lanka and the researcher expects that this study would fill the knowledge gap. The researcher uses structured interviews to collect data and selects 30 SMEs and 10 auditors for the study. Two interview guides will be prepared by the researcher for the SME owners, and for the Auditors. In the conceptual model the non-compliance is considered as the dependent variable and the independent variables are the cost of adherence to accounting standards, knowledge and competence of the owners, lack of qualified employees, relevance of standard guidelines and parties interested in the financial reports. The key finding is that, higher cost of adherence to accounting standards, lack of knowledge and competence of the owners, lack of qualified employees, and unavailability of parties interested in the financial reports other than owner is leading to non-compliance and the relevance of standard guidelines does not have a relationship with non-compliance. The non-compliance with Standard accounting practices is not only due to SMEs ‘can’t comply’ with them, but also due to not complying with them even when they are able to comply. The researcher finally makes recommendations to the policy makers, government and professional accounting bodies to design the policies and frameworks to ensure SMEs’ compliance with standard accounting practices.
Association of financial practices and performance of the small sized enterprises in Sri Lanka
(Department of Accountancy, University of Kelaniya, 2015) Manike, H.M.S.W.P.
Small and medium size enterprises (SMEs) involve with economy through contributing to growth of gross domestic product (GDP), in contributing to decrease unemployment, creating innovative and so on. But to development of SMEs, it is needed to effective record keeping, efficient use of accounting information to support financial decision-making and the high quality and reliability of financial data, effective financial management practices and use of SLFRS for SMEs. The objective is to find out wheher the finacial practices of SMEs have any significant relationship with performance of companies.For this analysis, categorize SMEs accordinga to World bank classification that is based on number of employees.Up to 50 employee from 10 identify as small business and up o 300 from 50 identify as medium size companies.The data which required for the analysis are collected through questionnaire and reffering relevant financial statement of the selected companies. Firstly, questionnaire are used to identify how the SMEs uses financial practices.In here consider about preparation of financial statement , auditing financial statement , control inventory , inventory management , utilize the computer system to repoting transaction. Secondely, financial statement are obtained for 5 years period to analyse the relation between finacial pracices and performance through financail ratios. This study expect to find out firstly. the differntion of financial practice between small and medium size enterprises. Secondely, there is a significant relation between fianacial practice and performance of enterprices.Finally through this analysis expect to indicate the significance of financial practices to SMEs to improve SMEs financial performance.
Capital structure and performance of Sri Lankan listed companies
(Department of Accountancy, University of Kelaniya, 2015) Rajapaksha, R.M.P.W.M.
Capital structure refers to the percentage of capital (money) at work in a business. There are two forms of capital: equity capital and debt capital. Each has its own benefits and drawbacks. Equity Capital refers to money owned by the shareholders (owners). Typically, equity capital consists of two types contributed capital, which is the money that was originally invested in the business in exchange for shares of stock and retained earnings, which represents profits from past years that have been kept by the company. The debt capital in a company's capital structure refers to borrowed money that is at work in the business. Debt capital mainly we can categorise as Short term debt and long term debt. The firm’s ability of fulfil the needs of its stakeholders is tightly related to the firm’s financing decisions. Capital or Financial Structure decision is to find out the best mix of debts and equity that a company uses to finance its business. (Damodaran 2001) This research seeks to assess the Capital Structure and performance of the listed business companies in Sri Lanka to identify impact between the Capital Structure and Companies Performance. The analysis done using the annual financial statements of 20 business companies listed on the Colombo Stock Exchange which covers a period of five (5) years from 2009-2014. Correlation and regression analysis applied on performance indicators such as Return on Asset (ROA) and Profit Margin (PM) as well as Short-term debt to Total assets (STDTA), Long term debt to Total assets (LTDTA) and Total debt to Equity (TDE) as capital structure variables. The expected result of this study is find out the wether there is any significant impact between capital structure and performance of the firm’s and to recommend that companies should use more of equity or debt in financing their business activities to enhance the performance of the Sri Lankan Listed Companies.
Capital structure effect on firm financial performance
(Department of Accountancy, University of Kelaniya, 2015) Pathiraja, P.M.K.K.
Capital structure is defined as combination of equity, debt or hybrid securities through which a company finances its assets. Firm’s leverage refers to the percentage of total debt in total financing. . Decision of Capital structure involve what type of source should be used either equity, or short or long term debt, or mix of sources of funding which better the firm’s financial performance. Initiating a business require purchasing assets in order to fulfill the purpose of organization. (Allen, 2011). An emerging consensus that comes out of the corporate governance literature (Smith, 2005) is that the interactions between capital structure and ownership structure impact on firm values. (Morck, 1988) Objective of this research is investigates the relationship between capital structure and firm financial performance as well as examine if more efficient firms choose more or less debt in their capital structure. This research methodology has gone some way in reconciling some of the empirical Irregularities reported in prior studies. Only report the results obtained from estimating dynamic models for both the efficiency and leverage equations. All data will collect by the secondary evidence by use the financial statement data. Result of this research is the effect of dispersed ownership is different across different capital structures. positive but insignificant for low leveraged firms and (significantly) negative for high leveraged firms. The latter finding is consistent with the view that the fear of bankruptcy induces managers of highly levered firms to lower debt.
Corporate governance and company performance
(Department of Accountancy, University of Kelaniya, 2015) Dehipegedara, B.
Corporate governance and its impact to the company performance are much debated areas. In the past incidental research has shown significant relationship between various corporate governance features and corporate performance. Good corporate governance is effect to the lower risk of the investors, attaching more investments and improving the performance of companies. And also agency theory suggested that a better governed firm should have better performance and higher valuation due to lower agency cost. For example, better governed U.S. firms have higher Return On Equity and higher Return On Assets.(Gompers, Ishii, and Metrick (2003)).However impact of corporate governance is vary between developing countries and developed countries. This study examines the relationship between corporate governance features and company performance in Sri Lanka. Some of corporate governance variables are Board size, Proportion of non-executive directors, leadership style and Board committees and ROE and ROA can be used as Performance measures. The selected sample is 20 listed firms from top 25 listed companies in the business today top 25 2012- 2013. Data collection methodology is secondary sources. Data will be obtained by Annual reports. Data will be analyzed by using SPSS model to obtain quantitative measures of descriptive statistics, regression analysis and correlation. The importance of this analysis is, it provides the evidence to find the positive relationship between Board sizes, Board committee, Non-executive directors’ impact, leadership structure firm performance which results in higher return.
Corporate governance issue to the business failure
(Department of Accountancy, University of Kelaniya, 2015) Madhubhashini, H.M.T.S.
Corporate governance is the process to control and direct the companies for long term results. There has been many ways to achieve this via good corporate governance but failure of some big companies raised various questions and issues. This study is motivated by the numerous reforms to strengthen the efficacy of corporate boards and their oversight committees, in the wake of high profile corporate failures. The empirical question, however, is whether recent proposals would enhance board and their committee effectiveness and in this way, reduce the likelihood of firm‘s failure. This study examines whether the composition, structure and functions of corporate boards and their interactions are related to the probability of corporate failure. The objective of this study is to find out the relationship between Corporate Governance issue and the Business Failure. As the methodology of this study, the all data will be collected through the secondary sources. The corporate governance will be measured by the terms; Accountability, Integrity, Transparency and Efficiency. The Business Failure will be measured by the Liquidity ratio, Defaulting long term loans, Continues losses, resigning top management people without refilling and over trading of the selected firms. The conclusion of this study is; there is a relationship between Corporate Governance and the Business Failure. Also there is a significant impact on Business Failure from the Corporate governance issue.
Corporate social responsibility and financial performance
(Department of Accountancy, University of Kelaniya, 2015) Lelwala, U.L.
The field of corporate social responsibility has grown exponentially in the last decade. More than half of the Fortune 1000 companies issue corporate social responsibility (CSR) reports. (Margarita Tsoutsoura, 2004). That scenario will be common in Sri Lankan context because it can see most of Sri Lankan business organizations engaged in CSR activities nowadays. CSR reporting is developing area in financial statements today. The concept of CSR seems to be crucial for the growth and expansion of enterprises and surely has a huge impact on the accounting and finance system (Justyna Fijałkowska, 2014) according to that CSR has huge impact on Accounting and Financing system so it may be affect to the financial performance because financial performance is generates from firm accounting and finance system. The objective of this research paper is to identify whether there is any relationship between CSR activities and financial performance. It can be expected that there may be a relationship between csr and Financial Performance based on previous researches findings. The methodology is collect the data from financial statements and analyze the relationship by using statistical techniques such as correlation analysis, simple regression analysis and etc.
Corporate social responsibility practices and profitability of the manufacturing companies in Sri Lanka
(Department of Accountancy, University of Kelaniya, 2015) Lakshitha, W.R.
We are living in a world consist with numerous problems related to environment and society. Corporate Social Responsibility (CSR) is a means to sort out these problems to some extent because business is a part of society. The main purpose of the every business unit is earning more and more profits but social responsibility is an obligation to the people living inside and outside the business organizations. All the companies deal with the different group of society such as owners, employees, customers, government, suppliers etc. The responsibility of business, which includes satisfaction of these parties along with the owner, is called social responsibility of business. CSR typically includes issues related to business ethics, community engagement, global warming, water management, mange the use of natural resources, human rights etc.(Rani & Hooda,2013). So, in order to get sustainable development and to survive in this competitive world, the organizations need to establish a close and good relationship with society. The objective of this research is to find out the relationship between corporate social responsibility (CSR) practices and profitability of the manufacturing companies in Sri Lanka. This study will examine the relationship of CSR and profitability of the companies in a different view and different method. For investigating the listed manufacturing companies in Srilanka stock exchange market by using primary sources (Questionnaires, interviews) and secondary sources (financial statements, related documents)as well as time series and the correlation test will be applied in MS-Excel. It is expected to find that makes clear relationship in the aspect of identifying the costs and benefits of CSR, and how those costs and benefits will affect the accounting earnings or profits of the firms.
Customer acceptance of internet banking in Sri Lanka
(Department of Accountancy, University of Kelaniya, 2015) Perera, T.M.
A growing phenomenon in financial services is the use of the internet as a channel for financial services. The internet bank usage might however not be easy for the consumers. Internet banking services have a relative advantage over brick-and-mortar banks in terms of “timeliness and accuracy of information flow” that minimizes the information latency in an intense decision-making environment. (Kesharwani & Bisht, 2011). The internet bank usage might however not be easy for the consumers. Consumers’ use of internet banking requires acceptance of the technology, which can be complicated because it involves the changing of behavioural patterns (Nilsson, Kerem, & Eriksson, 2004). Internet banking (IB) has been perceived as a potentially feasible alternative distribution channel, due to increasing computer literacy, deregulation in the financial sector, the rapid diffusion of electronic commerce, changing customer demands for innovative financial products (services), and strong commitments to reduce operating costs and create customer convenience (Celik, 2008). The purpose this research is to observe whether technology acceptance of internet banking in Sri Lanka. The sample for this research will obtained from the Sri Lankan commercial banks. The objective of this research is to findout the relationship between customer acceptance & internet banking
Effect of auditor fee on audit quality
(Department of Accountancy, University of Kelaniya, 2015) Madusanka, A.P.
The relation between auditor independence and an auditor’s ability to conduct high-quality audits has been widely debated by regulators, legislators, financial statement users and researchers. Fees paid to auditors can affect audit quality in two ways: large fees paid to auditors may increase the effort exerted by auditors, hence, increasing audit quality. Alternatively, large fees paid to auditors, particularly those that are related to non-audit services, make auditors more economically dependent on their clients. Such financial reliance may induce a relationship whereby the auditor becomes reluctant to make appropriate inquiries during the audit for fear of losing highly profitable fees. Conversely, the potential for audit failure imposes significant economic costs on the auditor (DeAngelo, 1981; Simunic, 1984). Though a number of recent studies have examined the relationship between audit and non-audit fees and independence, they are ambiguous as to the relationship between audit fees and auditor behavior (Larcker and Richardson, 2004). They also differ on how fee composition and client importance affect auditor independence. The paper aims to examine the relation between fees paid to auditors and audit quality during the period of 2010-2015. The paper constructs a measure of auditor profitability that is used as a proxy for auditor independence. The methodology is grounded in the notion that auditor independence is influenced by effort and risk-adjusted fees, rather than the level of fees received from clients. Since, risk and effort are unobservable, the paper uses proxies based on client size, complexity and risk to estimate abnormal fees. Abnormal fees are derived using a fee estimation model drawn from prior literature. The paper employs two metrics to assess audit quality – the standard deviation of residuals from regressions relating current accruals to cash flows and the absolute value of performance-adjusted discretionary accruals.
The effect of business credit availability on small and medium scale enterprises in Sri Lanka
(Department of Accountancy, University of Kelaniya, 2015) Nisansala, B.C.
The small and medium scale firms play important roles in the process of industrialization and economic growth in Sri Lanka. They are regarded as one of the main driving forces of economic development of all economies because they generate new employments, introduce new business methods and products, reduce poverty, inflation and income inequality and solve the balance of payment problem. Therefore, SMEs are considered as the backbone of economic development of a country (Ministry of financing and Planning, 2010). The objective of this research is to examine the relationship that exists between small and medium scale businesses in Sri Lanka. The information is collected by questionnaires distributing to sample SMEs in Sri Lanka. Based on the responses will receive through these questionnaires, observe the answer for the following major equations. Whether any relationship exists between SMEs and financial institutions that grant credit and challenges do SMEs face when securing credit for the business. To achieve the proposed research objective of highlighting the specific challenges inhibiting SMEs in accessing loans /funding in Sri Lanka, the quantitative research method adopt, which often is the most efficient and cost- effective research method (Gerhardt, 2004). Many researchers have looked at the issues of SMEs financing in Sri Lanka “enhancing the capacity of banks to shaping development of SMEs” (Nanayakkara, 2011). His study relates access to finance by SMEs to the nature of the region in which the SMEs operate and therefore adopted a comparative analysis approach. A descriptive statistics will fiund to be an ideal analysis technique and subsequently use in ascertaining the difficulties that SMEs will face in accessing bank loans.
Effect of capital structure on company performance in Sri Lanka
(Department of Accountancy, University of Kelaniya, 2015) Abeyrathne, A.H.M.U.S.
The objective of all financing decisions is wealth maximization and the immediate way of measuring the quality of any financing decision is to examine the effect of such a decision on the company’s performance. Capital structure is a financial tool that helps to determine ‘how do firms choose their capital structure?’ a firms capital structure is then the composition or structure of its liabilities. Therefore managers need to take decision very carefully regarding to the capital structure of company. Capital structure is defined as the relation between the debt and equity that is used to finance firm’s assets (Moyer 2001, McMenamin 1999). The choice of a capital structure of a firm can equally be viewed from the management and the ownership structure of the company (Du and Dai, 2002). Pindado and Torre (2004) posit that the capital structure of a firm is determined by the incentives and goals of those who are in control of the firm. Capital structure decision is the mix of debt and equity that a company uses to finance its business (Damodaran, 2001). The objective of this research is that investigates how the capital structure affects the company’s performance. The research is focusing on Impact of capital structure listed companies in Colombo Stock Exchange Market according to the variable and the study base on secondary data. The data are collected from published annual reports on individual companies, Colombo Stock Exchange books, Colombo Stock Exchange journals and magazines. The sample for this study is taken from 10 firms. The sample period is 10 years ranging between 2005 and 2015 and it is ensured that each of the firms has data for at least five years during this period under study. The method of data analysis use in this research work is the descriptive, correlation and regression technique. The data is on the key variables: ROI, ROA, debt-equity ratio, long term debt to capital employed ratio, total debt ratio and age. An exercise is carried out in this respect using debt-equity ratio, long term debt to capital employed ratio, total debt and age as Independent variable while using ROI and ROA as Dependent variables. Expecting findings are capital structure is significantly impact on company performance and capital structure measures are negatively related to firm performance.
Effect of capital structure on firm financial performance
(Department of Accountancy, University of Kelaniya, 2015) Kuruvita, K.A.S.P.
This study seeks to investigate the impact of capital structure on firm’s financial performance by analyzing the relationship between financial performances of Public limited (Quoted) Company in Sri Lanka. Capital structure is most significant discipline of company’s operations. This attempt to identify the impact between Capital Structure and Companies Financial Performance, taking into consideration return on asset (ROA), return on equity (ROE), Gross Profit and Net Profit of Companies. This study covers 20 sectors of Colombo Stock market in Sri Lanka, and 20 firms were identified as the sample. The analyze will be made the capital structure and its impact on Financial Performance capacity during 2010 to 2014 (04 years) financial year of Business companies in Sri Lanka. For the purpose of this study, the data will be extracted from the annual reports of sample companies. Correlation and multiple regression analysis are used for analysis. The results revealed there is positive relationship between capital structure and financial performance. And also capital structure is significantly impact on financial performance
Effect of capital structure on performance of pubic listed companies in Sri Lanka
(Department of Accountancy, University of Kelaniya, 2015) Perera, K.
This study aims to examine the effect on company capital structure to its performance. First examine the relationship between company capital structures on its performance in order to conclude facts which are effecting to company performance. (Ebaid, 2009) Stated that the relationship of capital structure to company performance is neither positive nor negative. However, (Dawar , 2014) and (Sheikh & Wang, 2013) argued that a negative relationship is exist between capital structure and company performance. Furthermore, (Thomsen & Pedersen, 2000) argue that the positive relationship of capital structure and company performance. Methodology of this research is to collect panel data from fifty companies that are listed in Colombo Stock Exchange (CSE) during the period of 2009 to 2015. Descriptive statistics, Correlation and Regression techniques uses to analyse relationship between Independent and depended variables by process data on regression and correlation techniques. Market to book value ratio (MTBVR) and Return on assets (ROA) uses as dependent variables while using Debt to Equity ratio as independent variable for the analysis. Outcome of this research will be support for investment decisions that are taken by investors. Key words: Sri Lanka, Capital structure, Company performance
The effect of capital structure on profitability in Sri Lankan company
(Department of Accountancy, University of Kelaniya, 2015) Madhubhashani, M.A.C.D.
The capital structure decision is essential for any business organization. To understand how companies finance their operations, it is necessary to examine the determinants of their financing or capital structure decisions. Weston and Bringham (1978) define capital structure as the permanent financing of the firm represented by long-term debt plus preferred stock and net worth. Capital structure decision is the vital one since the profitability of an enterprise is directly affected by such decision. The successful selection and use of capital is one of the key elements of the firms’ financial strategy (Velnampy & Aloy Niresh, 2012). This paper seeks to investigate the relationship between capital structure and profitability of listed companies on the Colombo Stock Exchange (CSE) during a five-year period. In order to meet the objectives of the study, data will collect from secondary sources mainly from financial report of the selected companies and regression analysis is used as the methodology in this paper. Variables used for the analysis include profitability and leverage, equity ratios. Profitability measured by Return on Assets (ROA). Expected outcome of this paper is to develop a theory relating to the capital structure and profitability based on the Sri Lankan Context.
Effect of financial leverage on firm size in Sri Lankan manufacturing industry
(Department of Accountancy, University of Kelaniya, 2015) Waniganeththi, W.V.D.A.M.
Companies differ in the use of financial leverage since it depends on a number of factors such as the size, nature of product, capital intensity, technology, market conditions, management attitude etc. Corporate size seems to be one of the most theorized determinants of financial leverage. Each company uses deferent level of financial leverage. But not all the companies are achieved success. Some corporates are achieved high market shares & growth rate. But some firm which has faced bankruptcy because they take more debt than the ability of repayment. There for financial leverage affect to the success of the company. In Sri Lanka, many companies they do not know how to maintain capital structure. So we won’t to known how to maintain capital structure on firm size. The purpose of this Research is to investigate, from a manufacturing market perspective, the firm size as a determinant of corporate financial leverage. Take 5 years data from 3 difference size firms, regression model is used to estimate the relationship between financial leverage and firm size. This research shows how firm size affects to financial leverage in Sri Lankan manufacturing industry.
The effect of leadership style on employee satisfaction
(Department of Accountancy, University of Kelaniya, 2015) Chamika, M.W.
Leadership style is one of the most important factors for organization and employee performance. Therefore very important to find the impact of leadership style on employee job satisfaction and as well as on firm financial performance. There are three types of leadership styles. Transformational leadership style was seen to have a positive effect on various facets of employee job satisfaction. Transactional leadership also turned out to be perceived as having a positive effect on different facets of employee job satisfaction. So did laissez-faire leadership Sanders (2007). Objective of this research is to found the influence of Leadership style to the employee job satisfaction. According to this research the dependent variable is employee job satisfaction and Independent Variables are Leadership Styles. Relating to this research topic other researchers use the primary sources to collect evidence of dependent variables and secondary data to collect evidence of independent variables. Given the presence of multiple dependent variables, this research uses ANOVA to analyze the effect of leadership styles on employee satisfaction and employee performance. Employee job satisfaction was seen to have a positive effect on the various aspects of employee job performance analyzed (Turner & Muller, 2005).
The effect of the working capital management on profitability of Sri Lankan companies
(Department of Accountancy, University of Kelaniya, 2015) Dharmasena, N.W.G.N.P.
Most firms have a large amount of cash invested in working capital, as well as substantial amounts of short- term payables as a source of financing. Therefore working capital mainly affect for the company profitability and liquidity. A well-managed working capital promotes a company’s wellbeing on the market in terms of liquidity and it also acts in favor for the growth of shareholders value (Jeng - Ren, Li & Han-Wen, 2006). Management of these short- term assets and liabilities warrants a careful investigation since the working capital management plays an important role for the firm’s profitability & risk as well as value (Smith, 1980). The main objective of this research is to find out the relationship between working capital management and company profitability. To collect the required financial data of these firms was obtained from the companies’ annual reports from CSE. Consequently, the sample data begins in 2010 and ends in 2014. The effects of working capital management on the firm's profitability are modeled using the following OLS regression equations to obtain the estimates. This study expects most of the Sri Lankan companies have large amounts of cash invested in working capital. It can be expected that the way in which working capital is managed will have a significant impact on profitability of those firms.