Impact of Capital Expenditure on Working Capital Management: An Application on Hotel and Travel Companies Listed in Colombo Stock Exchange

Abstract

This study is designed to examine on impact of capital expenditure on working capital management, an application on hotel and travel companies listed in Colombo stock exchange. Capital expenditure of the hotel and travel was used as the independent variable for the study whilst the dependent variables constituted some characteristic indicators that can affect the hotel and travel such as, net liquidity balance & working capital requirement. Data was collected from 125 annual reports which are related to 25 hotel and travel listed in Colombo Stock Exchange for five years from 2012 to 2016. Researcher used to regression analyze the data. Regression model was used for analyzing the relationship between Capital Expenditure and Working Capital Management for the sample firms. A significant negative relationship was found between net liquidity balance and Capital Expenditure, which implies that these firms don't increase the balance of most liquid assets when faced with capital expenditure since they don't have enough internally generated funds to be used in long term fixed investments. Furthermore, a significant negative relationship is also found between working capital requirement and Capital expenditure, which implies that these firms are efficiently managing the non-financial components to enhance their cash, balances to be used in speculative and operational activities.