Influence of Working Capital Management on the SME?s Profitability-Evidence from Kosovo

The study aims to show the impact of working capital management on the profitability of 98 SMEs operating in Kosovo, mainly in the manufacturing and construction sectors. The data are taken from the financial statements of these companies for the period 2010 -2020, while the Ordinary least square (OLS) was used to confirm the hypotheses. To express SMEs profitability, Return on Assets (ROA) is taken as a dependent variable, while to express working capital management, independent variables are taken: the inventory turnover period (INTP), receivables collection period (TRCP), trade payable period (TPP), and cash conversion cycle (CCC). In addition, four control variables (business size, current ratio, sustainable growth, and leverage) are included, which are not important to the study but can affect the results. The findings show that SMEs boost profitability by lowering INTP and raising TRCP, TPP, and CCC. This study concludes that managing working capital correctly and efficiently is crucial for increasing a company's profitability.