Step 1: Answer the following questions 1. What is the structure of the literature review? Is...

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Step 1: Answer the following questions 1. What is the structure of the literature review? Is it organised by topic? By source? Else? 2. Can you find an example of a strong paragraph with topic sentence + supporting sentences + concluding statement? 3. Does the student use linking/signposting words between paragraphs/ arguments (e.g. moreover, furthermore, similarly, because, as a result, consequently, therefore, although, yet)? How many can you find? Are they used randomly or efficiently (to built a link)? NB: If you choose to read 1 synthesis/paragraph from the forum, question 1 above is not relevant. Step 2: Whole class to compare their answers and conduct a peer-assessment 1. In your opinion, what is the level of critical assessment from each student? 2. Based on the marking rubric below, what mark would you give to each literature review/synthesis? -40%: includes at least 5 peer-reviewed articles relevant to the topic + minimum attempt at comparing/contrasting different arguments. 80%: includes at least 10 peer-reviewed articles relevant to the topic + good critical writing (e.g.. good structure and paragraphs). - 100%: includes at least 12 peer-reviewed articles relevant to the topic + strong critical writing (e.g.. strong structure, paragraphs and language)+ concluding paragraph clearly identifying the debate and potential gap in the literature. Individual Essay Topic: How does working capital management affect firm profitability? Theoretical Part Managing WC involves maintaining liquidity management by day-to-day operations and complying with obligations for a firm to operate smoothly (Eljelly, 2004). The cash conversion cycle (CCC) is a measure of working capital management, to measure the length of time between cash payments to suppliers (cash payables) and cash received from customers (Afrifa and Padachi, 2016). The CCC analyses the efficiency in managing cash to generate sales, aiming for a short CCC. It starts with selling off inventory in a fast manner, so customers can pay fast. In contrast, the companies would like to lengthen their time to pay their supplier, hence negotiating long payable days (Deloof, 2003). Literature Review Several studies have analysed how working capital management affects firm profitability in various industries, markets, and countries. Most of the studies conclude a negative relationship between WCM and firm profitability. This section will focus on comparing arguments from the studies, providing an opinion, and identifying possible research gaps. WCM is an important aspect of the corporate financial decision-making process because it affects the firm's profitability and value (Ponsian, 2014). Discussions on various studies have utilised the CCC to analyse whether shortening the cycle leads to a positive or negative effect on firm profitability. Empirical evidence supporting WCM, and profitability requires an aggressive working capital approach (shorter CCC) to increase profitability and performance (Shin and Soenen, 1998; Deloof, 2003). This implies that a reduction in working capital investment along with a short CCC leads to high profits. An effective WCM consists of current assets to be greater than current liabilities, to avoid any operational problem. Ponsian (2014) and Kruger (2005) suggests a low CCC is crucial for a firm, hence cash flow must be estimated effectively. Lazaridis (2006) considers economic factors and a firm's liquidity conditions when companies are expected to look at how their sales and expenses may grow on a percentage basis for the financial year. Although the CCC is a measure of the WCM in these studies; other studies show there is often an insignificant relationship between CCC and firm performance (Deloof, 2003; Sharma and Kumar, 2011). Therefore, WCM needs to be effectively managed to generate greater share sales, therefore it is important for a firm to maintain an optimal level of WC to maximise firm value (Deloof, 2003). There is no consensus in the literature in relation to whether a conservative (longer CCC) or an aggressive approach (shorter CCC) increases firm profitability. Some argue that a conservative approach will increase the chance of high sales results in an increase in firm profitability, through high inventory and attractive credit conditions (Afzar and Nazir, 2007, Sharma and Kumar 2011). Whereas others argue over a more aggressive approach since it is more efficient and implies the company is financially stable since it minimises investment in unproductive assets. Additionally, a shorter CCC means that the firm will need less short-term borrowing, thus low short- term liabilities. Along with this, it will benefit the firm to preserve debt capacity, making it easier to borrow (Davie and Crawford, 2014; Deloof, 2003) The study by Raheman and Nasr (2007) suggests a significant negative and statistically significant relationship between WCM and firm profitability. An increase in the CCC, resulting in a decrease in firm profitability Managers can create value for shareholders by reducing account receivables and inventories days for CCC to be at a reasonable minimum level. Similarly, Goncalves et al (2018) have also identified a negative and economically significant relationship between WCM and firm profitability. Both studies (Raheman and Nasr, 2007; Goncalves, 2018) emphasises that there is a consensus that reducing days in receivables has a direct impact on firm profitability to increase. Biosjoly (2009) has focused his studies on the effect of aggressive working capital policy on key financial ratios. Findings from Biosjoly (2009) identified cash flow per share was significantly improved, using an aggressive approach of working capital. Likewise, Singh et al. (2017) had a similar view, their findings suggest that firm profitability is likely to increase by a company that executes an aggressive approach, using the meta-analysis technique and CCC measures. 2 The study by Moss et al. (1993) examined the relationship between the length of the CCC and the size of retail firms. The size of the firm where a form a measure by using total assets/net sales confirms to be a factor in the length of the CCC period. CCC duration has inversely related to cash flows in the business operations. Moss et al. (1993) found a shorter CCC are associated with larger retail firms, comparably longer CCC are associated with smaller firms. Ebben and Johnson (2011) have analysed relationships between CCC and liquidity and performance of small retail firms using three-year financial data. Empirical evidence supports this as a sample of US retail firms were selected, showing CCC is a significant factor in capital needs, liquidity, and performance. Both studies emphasise the importance of capital constraints, allowing small firms to manage cash effectively by efficient handling of WCM. (Moss et al. 1993; Ebben and Johnson, 2011). Research gap There are limitations in the literature on WCM and firm profitability, some are linked with a positive relationship between WC and profitability while others demonstrate a negative relationship. Prasad et al. (2019) confirms a positive effect of WCM on firm profitability, considered ROA financial ratio to determine the efficiency of how the firm uses its total assets to generate profit. However, they haven't considered the impact of WCM on other profitability measures, such as ROCE, ROE, ROS, which limits their study. Moreover, the research sample consists of listed firms in the Steel Industry in Vietnam, thus a positive effect on WCM on firm profitability may not be the same for another country or industry (Prasad et al.). Nevertheless, some studies concluded a negative relationship between CCC and firm profitability but not statistically significant (Deloof, 2003). Findings from Deloof (2003) are outdated since the sample data was for the 1974-1994 period, hence not representable for companies operating in the 21st century. Sharma and Kumar (2006) study are findings were based on a limited number of studies. Some studies have analysed current and quick ratios however this provides little detail about the firm's WC. (Moss et al. 1993). Consequently, it would be beneficial for researchers to examine CCC and optimise efficiency by addressing profitability issues in WCM. Use this space to write your group synthesis (one paragraph) based on your review of the literature. Your synthesis should be critical (identifying a debate and/or gap), well-organised (strong paragraph), using appropriate linking words. Word limit: 150 words max. Step 1: Answer the following questions 1. What is the structure of the literature review? Is it organised by topic? By source? Else? 2. Can you find an example of a strong paragraph with topic sentence + supporting sentences + concluding statement? 3. Does the student use linking/signposting words between paragraphs/ arguments (e.g. moreover, furthermore, similarly, because, as a result, consequently, therefore, although, yet)? How many can you find? Are they used randomly or efficiently (to built a link)? NB: If you choose to read 1 synthesis/paragraph from the forum, question 1 above is not relevant. Step 2: Whole class to compare their answers and conduct a peer-assessment 1. In your opinion, what is the level of critical assessment from each student? 2. Based on the marking rubric below, what mark would you give to each literature review/synthesis? -40%: includes at least 5 peer-reviewed articles relevant to the topic + minimum attempt at comparing/contrasting different arguments. 80%: includes at least 10 peer-reviewed articles relevant to the topic + good critical writing (e.g.. good structure and paragraphs). - 100%: includes at least 12 peer-reviewed articles relevant to the topic + strong critical writing (e.g.. strong structure, paragraphs and language)+ concluding paragraph clearly identifying the debate and potential gap in the literature. Individual Essay Topic: How does working capital management affect firm profitability? Theoretical Part Managing WC involves maintaining liquidity management by day-to-day operations and complying with obligations for a firm to operate smoothly (Eljelly, 2004). The cash conversion cycle (CCC) is a measure of working capital management, to measure the length of time between cash payments to suppliers (cash payables) and cash received from customers (Afrifa and Padachi, 2016). The CCC analyses the efficiency in managing cash to generate sales, aiming for a short CCC. It starts with selling off inventory in a fast manner, so customers can pay fast. In contrast, the companies would like to lengthen their time to pay their supplier, hence negotiating long payable days (Deloof, 2003). Literature Review Several studies have analysed how working capital management affects firm profitability in various industries, markets, and countries. Most of the studies conclude a negative relationship between WCM and firm profitability. This section will focus on comparing arguments from the studies, providing an opinion, and identifying possible research gaps. WCM is an important aspect of the corporate financial decision-making process because it affects the firm's profitability and value (Ponsian, 2014). Discussions on various studies have utilised the CCC to analyse whether shortening the cycle leads to a positive or negative effect on firm profitability. Empirical evidence supporting WCM, and profitability requires an aggressive working capital approach (shorter CCC) to increase profitability and performance (Shin and Soenen, 1998; Deloof, 2003). This implies that a reduction in working capital investment along with a short CCC leads to high profits. An effective WCM consists of current assets to be greater than current liabilities, to avoid any operational problem. Ponsian (2014) and Kruger (2005) suggests a low CCC is crucial for a firm, hence cash flow must be estimated effectively. Lazaridis (2006) considers economic factors and a firm's liquidity conditions when companies are expected to look at how their sales and expenses may grow on a percentage basis for the financial year. Although the CCC is a measure of the WCM in these studies; other studies show there is often an insignificant relationship between CCC and firm performance (Deloof, 2003; Sharma and Kumar, 2011). Therefore, WCM needs to be effectively managed to generate greater share sales, therefore it is important for a firm to maintain an optimal level of WC to maximise firm value (Deloof, 2003). There is no consensus in the literature in relation to whether a conservative (longer CCC) or an aggressive approach (shorter CCC) increases firm profitability. Some argue that a conservative approach will increase the chance of high sales results in an increase in firm profitability, through high inventory and attractive credit conditions (Afzar and Nazir, 2007, Sharma and Kumar 2011). Whereas others argue over a more aggressive approach since it is more efficient and implies the company is financially stable since it minimises investment in unproductive assets. Additionally, a shorter CCC means that the firm will need less short-term borrowing, thus low short- term liabilities. Along with this, it will benefit the firm to preserve debt capacity, making it easier to borrow (Davie and Crawford, 2014; Deloof, 2003) The study by Raheman and Nasr (2007) suggests a significant negative and statistically significant relationship between WCM and firm profitability. An increase in the CCC, resulting in a decrease in firm profitability Managers can create value for shareholders by reducing account receivables and inventories days for CCC to be at a reasonable minimum level. Similarly, Goncalves et al (2018) have also identified a negative and economically significant relationship between WCM and firm profitability. Both studies (Raheman and Nasr, 2007; Goncalves, 2018) emphasises that there is a consensus that reducing days in receivables has a direct impact on firm profitability to increase. Biosjoly (2009) has focused his studies on the effect of aggressive working capital policy on key financial ratios. Findings from Biosjoly (2009) identified cash flow per share was significantly improved, using an aggressive approach of working capital. Likewise, Singh et al. (2017) had a similar view, their findings suggest that firm profitability is likely to increase by a company that executes an aggressive approach, using the meta-analysis technique and CCC measures. 2 The study by Moss et al. (1993) examined the relationship between the length of the CCC and the size of retail firms. The size of the firm where a form a measure by using total assets/net sales confirms to be a factor in the length of the CCC period. CCC duration has inversely related to cash flows in the business operations. Moss et al. (1993) found a shorter CCC are associated with larger retail firms, comparably longer CCC are associated with smaller firms. Ebben and Johnson (2011) have analysed relationships between CCC and liquidity and performance of small retail firms using three-year financial data. Empirical evidence supports this as a sample of US retail firms were selected, showing CCC is a significant factor in capital needs, liquidity, and performance. Both studies emphasise the importance of capital constraints, allowing small firms to manage cash effectively by efficient handling of WCM. (Moss et al. 1993; Ebben and Johnson, 2011). Research gap There are limitations in the literature on WCM and firm profitability, some are linked with a positive relationship between WC and profitability while others demonstrate a negative relationship. Prasad et al. (2019) confirms a positive effect of WCM on firm profitability, considered ROA financial ratio to determine the efficiency of how the firm uses its total assets to generate profit. However, they haven't considered the impact of WCM on other profitability measures, such as ROCE, ROE, ROS, which limits their study. Moreover, the research sample consists of listed firms in the Steel Industry in Vietnam, thus a positive effect on WCM on firm profitability may not be the same for another country or industry (Prasad et al.). Nevertheless, some studies concluded a negative relationship between CCC and firm profitability but not statistically significant (Deloof, 2003). Findings from Deloof (2003) are outdated since the sample data was for the 1974-1994 period, hence not representable for companies operating in the 21st century. Sharma and Kumar (2006) study are findings were based on a limited number of studies. Some studies have analysed current and quick ratios however this provides little detail about the firm's WC. (Moss et al. 1993). Consequently, it would be beneficial for researchers to examine CCC and optimise efficiency by addressing profitability issues in WCM. Use this space to write your group synthesis (one paragraph) based on your review of the literature. Your synthesis should be critical (identifying a debate and/or gap), well-organised (strong paragraph), using appropriate linking words. Word limit: 150 words max.

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Answer Step 1 Answering Questions 1 Structure of the Literature Review The literature review appears to be organized by topic with sections discussing different aspects of working capital management W... View the full answer