Impact of working capital policy on financial performance of selected companies on the London stock exchange

The study investigated the impact of working capital policy on the financial performance of selected companies listed on the London Stock Exchange (LSE), focusing on the Consumer Staples sector. Using a positivist research philosophy, a deductive approach, and quantitative methodology, the study analyses financial data from 65 firms published between 2018 and 2023. The study examines working capital investment policy (WCIP) and working capital financial policy (WCFP) as independent variables, with return on assets (ROA) and return on equity (ROE) as dependent variables. The results reveal that working capital investment policy (WCIP) positively impacts Return on Assets (ROA) (Pearson correlation 0.366, p=0.046) and return on equity (ROE) (Pearson correlation 0.485, p=0.007), while working capital financial policy (WCFP) shows no significant relationship with financial performance. The regression model explains 31.6% of the variance in financial performance. It is recommended that firms adopt a conservative working capital investment policy and a conservative financial policy to enhance their financial performance.