Abstract
Working capital management plays an important role in success and failure of firm in business because of its effect on firm’s profitability as well as on liquidity. Working capital consists of investments in current assets, which includes shortterm assets – cash and, inventories, receivable and marketable securities. The universe of the study is textile industry, which is one of the oldest and at one time the fast developing industry in the large scale sector of Pakistan. The study is based on secondary data collected from listed firms in Karachi stock exchange for the period of 2001-2006 with an attempt to investigate relationship between profitability, and working capital management components. The effect of working capital management on profitability is tested using the panel data methodology. Based on correlation and regression analysis our findings show that there is a strong positive relationship between profitability and cash, accounts receivable and, inventory while there is a negative relationship between profitability and accounts payable. This means that increase in cash, inventory and credit sales will lead to increase profitability of firm.
Malik Muhammad,, Waseem Ullah Jan, Kifayat Ullah. (2010) Working Capital Management and Profitability An Analysis of Firms of Textile Industry of Pakistan, Journal of Managerial Sciences, Volume 6, Issue 2.
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