Impact of Working Capital in Textile Firms Profitability

In: Business and Management

Submitted By robi0171
Words 2867
Pages 12
Interdisciplinary Journal of Research in Business

ISSN 2046-7141
Vol.3, Issue.10, (pp.30- 36) | 2015

Muhammad Ehsan Javaid Leghari
PhD Management Sciences
COMSATS Institute of Information Technology Islamabad, Pakistan

Working capital management is necessary for profitability. In this study working capital management of sugar industry and its impact on profitability is checked from 2002 to 2012. Total observations are 308 while 28 companies listed at Karachi Stock Exchange are in sample. Correlation and pooled panel data regression analysis is performed. Results show that day’s inventory, cash conversion cycle, cash ratio, account receivable to sale ratio, short term investment ratio, secured short term obligation and fixed asset ratio are negatively affecting profitability of firm. Whereas quick ratio, days account receivable and working capital are positively affecting profitability.
Key words: Return on Asset, Cash Conversion Cycle, Secured Short Term Obligations, Cash Ratio, Account
Receivable to Sale

In finance field two extensively examined areas are capital structure and working capital management. It is matter of great importance both for researchers and corporate individuals to figure out firm’s value and profitability. Working capital management has a direct impact on the firm profitability along with reducing the liquidity risk. Liquidity is one face of coin and profitability is other. It clarify that working capital management is directly proportional of firm profitability. US financial crises highlighted problems in already identified factors for working capital management.
Introduction of Basel 3 accord also directed us toward working capital management to hold liquidity in financial sector. Current business world is…...

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