THE INFLUENCE OF WORKING CAPITAL MANAGEMENT UPON PROFITABILITY: AN EMPIRICAL STUDY OF PAKISTANI FIRMS

Jafar Hussain; Muhammad Ibrahim; Muhammad Amjad

Jafar Hussain School of Economics and Management, South East University, Nanjing, CHINA
Muhammad Ibrahim Institute of Business Administration, KFUEIT, Rahim Yar Khan, Punjab, Pakistan
Muhammad Amjad Institute of Business Administration, KFUEIT, Rahim Yar Khan, Punjab, Pakistan

Keywords: Capital Management, Pakistan Stock Exchange, Profitability of the Organization

Abstract

The main objective of research to know that working capital management impacts significantly on the profitability of Pakistani firms. An analysis of 35 large manufacturing companies listed on Pakistan Stock Exchange (PSE) was carried out in study using panel data. The firs' annual financial reports from 2012 to 2024 were the sources used to obtain this information. Using pair wise correlation analysis, it was examined that how working capital management affected businesses in Pakistan. For this purpose, statistical procedures were used to examine the assumed relationships among the research issues under consideration. The results show that liquidity (current ratio) has a beneficial effect on the profitability. An organization's bottom line takes a hit when accounts receivable are overdue. The influence of inventory (days) is negative. Equally detrimental to profitability is the cash conversion cycle, but accounts payable due dates are a positive indicator. The profitability of a corporation is positively affected by its size and sales growth, but negatively affected by financial debt. In this regard, the results provide significant information in reaching the desired conclusion in order to make some suitable decisions about the assumed relationships that may be supportive for the investors and decision-makers in particular situatiuons and contexts.