Article Review

On
Profitable Working Capital Management in Industrial
Maintenance Companies

Presented to

Arsi University

College of Business and Economics

Department of Accounting and Finance

Submitted to: Abebaw Kassie (PhD)

Title: Profitable Working Capital Management in Industrial Maintenance Companies

Authors:
Salla Marttonen 
Sari Monto 
Timo Kärri 
Source: Journal of Quality in Maintenance Engineering, Vol. 19 Issue: 4, pp.429-446
http://dx.doi.org/10.1108/JQME-08-2013-0054
Citation:
Salla Marttonen, Sari Monto, Timo Kärri, (2013) "Profitable working capital management in
industrial maintenance companies", Journal of Quality in Maintenance Engineering, Vol. 19
Issue: 4, pp.429 – 446

2. Research type

As clearly indicated in the research, this particular study has utilized quantitative approach to
deal with the research Propositions presented. Analytical modeling, using deductive logic in
representing a concept or a process, has been used in the research. More specifically the
researchers have used the flexible asset management model (FAM model) to measure the casual
relationship that exists between working capital management on the ROI.

3. Statement of the problem & background of the study

The researchers have forwarded relevant and well established background information for their
research area. They have gone through the existing literature and maintained a good ground for
the research work. They have also clearly presented the existing research gap particularly on the
working capital management of industrial maintenance service providers. With a precisely
presented conceptual as well as empirical review, they finally have come up with the statement
of the problem.

4. General and specific objectives

In this specific research work, the researchers have clearly established the objective that the
research is aimed to accomplish. The presented the general objective first and then elaborated the
specific objectives through the four research questions, which are very clear, precise and
straightforward.

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5. Literature review

As the purpose of any literature review is to get a much sound and credible base for the proposed
study, the authors of the research have gone through different sources; indeed most of the
literatures referenced are empirical ones, to accomplish the goal. The researchers could be
appreciated for their brief review of information and emphasis on the important results and
conclusions of the references they mentioned.

6. The Research Variables and their relevance

All the variables identified and discussed by the authors are relevant, and consistent with the
existing literature in financial management. The only difference we could see with this specific
research work is that, the use of the FAM model which would ultimately enable the researchers
formulates a complicated relationship among variables. The researchers have come up with an
abundant literature, which could be taken relevant for the proposed study.

7. Research Hypothesis

In this specific research there is no an explicitly stated or established hypothesis for a test, rather
the researchers formulated four specific research questions to be dealt by the study.

8. Research method and design

Analytical modeling has been used as a research method in this study which could be considered
appropriate for the proposed study. Analytical modeling with FAM is actually at its early stage,
and the authors’ choice to utilize this model could be appreciated as it is adding a greater value
both to existing conceptual and empirical literature. However, the application of such a model for
defining casual relationships would be a drawback as the model is not sufficiently tested for
external validity (Mettas & Savva, 2001).

8.2. Sampling design and sample size

The sampling design as well as the sample selection procedure the researchers used were not
adequate and convincing. First, their choice of convenient sampling (implicitly implied) is in
conflict with their research objective (inferential statistics is assumed as the research is casual) as
well as data analysis tool; unless a random sample is taken it would be hard to infer the obtained
result for the industry as a whole. Secondly, the sample selection process is not objective enough
to insure reliability of the findings. Thirdly, the sampling frame used by researchers was just a
membership list which may not guarantee full access to the population. Last but not list, the
researchers have failed to take the objective measure to determine the sample size and its
composition.

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 8.3. Data collection method and sources

With regard to the data collection and data sources used by the researchers we can comment on
two specific points. The database used for the data collection, VOITTO+ company database, is
considered to be among the top most providers of financial statements data for over 182,000
active and over 8,000 non-active Finnish companies. Over 30 search criteria can be used to get
comprehensive data on companies or company groups
(http://lipas.uwasa.fi/~jaty/tp/voitto/voitto.htm). Thus, the researchers’ choice of the data base
could be appreciated. Yet, the use of financial statements as research data has been often
questioned with regard to its suitability and reliability.

8.4. Data analysis

The researchers come up with four research questions to be tested. Thus, the data analysis is
done in line with the proposed research questions. The analysis is also presented in four parts so
as to address each research question independently. The researchers further added

9. Comparing results in the context of the stated objectives

No research work is done without a predetermined objective, and this research is not an
exception. However, some fail to come up with a result that meets the objective. With regard to
this research, it can be said, the researchers have gone steps to make sure the stated objectives,
with four research questions, have been met. Thus, the general objective of the research is
addressed through the results and discussion part with every research question being dealt
independently, and finally discussed in light of the general objective of the proposed research.

10. Conclusions and recommendations

The analysis part followed by the discussion finally leads to the conclusion of their findings.
Where by ROI correlates negatively with the length of the cycle time of operational working
capital and concluded that the effect of the cycle time of operational working capital on the ROI
is especially strong in the industrial maintenance service sector, arising from light fixed assets
and good profitability. The researchers have also made a brief conclusion with regard to each of
the four research questions.

Finally the researchers recommended further researches to include examining the profitability
impacts of working capital management on the customer companies of maintenance services, as
opposed to the service buyers discussed in this paper.

11. Lessons learnt from the article

Among the benefits that we might get from having a critical review of such research article is
that we will gain an insight towards the instantly changing area of business and Accounting. This
specific research has a lot do with this respect;

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It helps in integrating the theoretical knowledge we get from the classrooms and text books with
an empirical or practical experience in the business world regarding the issues that surround
working capital management. It brought about new ideas to the existing literature as they have
made effort to classify and present what factors have to be considered in measuring the impact of
WCM on firms’ profitability. The researchers have showed that the effect of the cycle time of
operational working capital on the ROI is especially strong in the industrial maintenance service
sector, arising from light fixed assets and good profitability. The researchers have also showed
how the large enterprises seem to have a competitive advantage over the SMEs due to lower
fixed assets ratios.

12. Reference

Liu, Y., & Trivedi, K. S. (2006). Survivability quantification: The analytical modeling
approach. International Journal of Performability Engineering,  2(1), 29.

Mettas, A., & Savva, M. (2001). System reliability analysis: the advantages of using analytical
methods to analyze non-repairable systems. In Reliability and Maintainability Symposium,
2001. Proceedings. Annual (pp. 80-85). IEEE.

Salla Marttonen , Sari Monto , Timo Kärri , (2013) "Profitable working capital management in

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