The Empirical Analysis On The Working Capital Policy And Its Profitability Of Chinese Industrial Companies

The necessary condition for the existence of a corporation is the management of working capital. The realization of working capital goals has to be based on scientific working capital policies. To a certain degree, the competitiveness of a corporation is determined directly by its management and application capability of the working capital. Many of the listed companies in our country are devoid of stable or appropriate working capital policies. So it is very important to carry out the research of working capital policy.In this paper, empirical method is used. The current assets, current liabilities, total assets, net profit, net asset, the income from main business, main business cost and the total number of common stock of annual report during 1998 to 2007 of sample companies,all are used for system clustering analysis.This research contains five sections. The first section is introduction, which gives the research background and target. The reference and theory reviews are in the second section, in which some important domestic and foreign references about working capital policy are reviewed. And the theoretical principle of this research is proposed. The third section is research methodology and plan. In this part, the sample and data source, research method, research assumption, research plan are introduced. Extreme value distribution model is used in financial accounting field for the research of operation characteristics of working capital policy. The fourth section is the key content of this paper, including data processing, empirical conclusion and analysis. In this section, the system analysis of profitability, development trend, existing problems of working capital policy adopted by industry corporations are performed. The relationship between working capital policy and strategic target of corporation is crystallized. The paper believes that working capital policies employed by the listed industrial companies in our country, have undergone three phases of development along with the economic development in the past ten years: from 1999 to 2002, only normal policies and conservative policies are applied; from 2003 to 2005, there is a phase of co-existence of three working capital policies; from 2006 to 2007, the phase of transition from both the normal and conservative policies to normal policies alone appear. Generally speaking, the potential types of working capital policies for the industrial companies in our country are the normal policies and conservative policies, with emphasis on the former. The last section is conclusion and suggestion. Study shows that moderate policy leads to higher yield than conservative policy, and the profit level rising range of moderate policy is always higher than that of conservative policy. On the basis of research conclusions, in this paper, a series of suggestions are proposed aiming to operation characteristics of working capital policies of Chinese listed industry companies.The innovation of this paper is that the three development phases of working capital policies of Chinese industrial corporations are found, which proves the characteristics of moderate and conservative working capital policies in China...