International Journal of Business and Management; Vol. 7, No. 15; 2012 ISSN 1833-3850 E-ISSN 1833-8119 Published by Canadian Center of Science and Education 50 Different Working Capital Polices and the Profitability of a Firm Tamer Bahjat Sabri 1 1 Faculty of Economics & Business & Management, Palestine Technical University, Kadoorie, Palestine Correspondence: Tamer Bahjat Sabri, Faculty of Economics & Business & Management, Palestine Technical University- Kadoorie, B.O BOX (7) Tulkarm, Palestine. Tel: 970-598-137-015. E-mail: tamerbs@hotmail.com Received: February 2, 2012 Accepted: July 2, 2012 Published: August 1, 2012 doi:10.5539/ijbm.v7n15p50 URL: http://dx.doi.org/10.5539/ijbm.v7n15p50 Abstract This study examines if there is a difference between the Profitability of Jordanian industrial companies which have a low cash conversion cycle and the Profitability of those which have a high cash conversion cycle. Moreover, eight indexes have been developed to help the investor and the manager of the company in Jordan in to make their decisions. To achieve the objectives of the study, a sample of 45 Jordanian industrial companies listed at Amman Stock Exchange (ASE) was studied. The study covered the period from 2000 to 2007. T-Tests and Mann-Whitney-U Tests were used to test the four hypotheses of the study. It was concluded that there was a statistically significant difference among the companies that have a high cash conversion cycle and those which have a low cash conversion cycle. Eight indexes of performance differed between companies with high cash conversion cycles and companies with low cash conversion cycles. Keywords: cash conversion cycle, profitability, index 1. Introduction The global economy has witnessed the worst crisis since the thirties of the last century and as the global crisis began in the developed countries, particularly in the United States of America, most of economic sectors were affected, especially the industrial sector. For example, the car industry sector suffered a great liquidity crisis represented by an inability to pay short-term obligations which led to the collapse of the auto giant General Motors (GM). The crisis has since spread to Arab countries but less severely and Jordan has been affected by the crisis like the rest of the Arab countries. The industrial sector in Jordan is one of its most important economic sectors as its contribution to GDP for the year 2008 was about 24.5%. This sector has been affected by the global crisis, as the national exports in 2009 decreased by 11.7% from 2008 (Ministry of Industry and Trade of Jordan, website).Exports of potash, fertilizers and clothing were biggest losers in this decrease. This, combined with the stresses of banks in granting loans, has resulted in a decline in liquidity and managing the working capital has become one of the most important things that should be of interest to companies so as not be exposed to the risk of bankruptcy. So it has become necessary to work to find the means by which the industrial public shareholding companies should deal with managing working capital in order to increase the profitability of these companies and their value and to ensure their survival and continuity, as working capital represents 51% of the industrial sector total assets according to (Sabri, 2010). And this percentage is supported by the one that has been concluded in (Al-Naif, 2005) of 55%. This percentage is high compared with the result of (Hill, 2009) of a study made in the United States of America which indicated that the proportion of working capital to total assets is 22%. Working capital is considered to be as a criterion of the debtor's ability to repay its obligations in case of liquidation but the new view of liquidity is based on the continuity of the company and does not depend on the liquidation of the assets traded and instead depends on the cash flows that result from these assets (Fess, 1966). The cash conversion cycle is defined “as a comprehensive measure of working capital as it shows the time lag between expenditure for the purchases of raw materials and the collection of sales of finished goods” (Uyar, 2009). Managers should know the cash conversion cycle for their companies and not only the final profits for their companies (Hutchison, et. al, 2007). It is worth mentioning that the issue of working capital management has not received much attention in the