WORKING CAPITAL RESEARCH
No evidence was found of an empirical examination that directly addresses the question of
aggressive/conservative working capital policy. However several studies have addressed areas of peripheral
importance to the issues examined in this paper.
The predictive power of financial ratios has been a recurring subject of analysis, and researchers have also
focused on grouping ratios into useful classifications, see Chen and Shimerda [4] for an excellent review. Another
area of research has focused on the issue of using regression analysis versus traditional financial ratios for analysis
and prediction, for example Frecka and Lee [7]. An interesting paper by Nunn [16] examined why firms have
different levels of working capital. His paper dealt with the strategic determinants of working capital (cash, shortterm
securities, accounts receivable, and inventory) on a product line basis. He used factor analysis to test 166
variables against the working capital policies of over 1700 businesses, or product lines, from 1971 to 1978. His final
*The University of Toledo