Abstract
The current study has its focus on investigating the relationship
between working capital management and profitability of Pakistani and
Indian firms. In order to measure the profitability, ROA and ROE has
been chosen as proxies for dependent variable, while current ratio (Cr),
quick ratio (Qr), accounts receivable turnover (ARCTR), inventory
turnover in days (INVTR), accounts payable turnover in days (APTR),
assets turnover (ATR) and cash conversion cycle (CCC) have been
utilized as independent variables. The same set of dependent and
independent variables are selected for Indian firms as well. The focus
of the study is pharmaceutical and chemical sectors of both these
countries. Qr, ARCTR, INVTR and CCC are statistically, significant
and positively related with ROA of the Pakistani firms while APTR is
statistically, significant and negatively related with ROA. It has been
observed that ATR, CR, ARCTR, are statistically, insignificant and
positively related with ROE, while, Qr, INVTR and CCC are
statistically significant and positively related with ROE of Pakistani
firms. In Indian firms, Cr, Qr, CCC, INVTR, and ARCTR are
statistically, significant and positively related with ROA, while APTR is
statistically, insignificant and Inversely related with both ROA and
ROE. The outcome of the study can be deployed by policy makers,
financial analysts and financial managers.
Syed Tanveer Hussain Shah. (2019) Impact of Working Capital Management on Profitability of Pharmaceutical and Chemical Companies: A Comparative Study of Pakistan and India , Journal of Managerial Sciences, Volume 13, Issue 1.
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