Corporate Profitability-Working Capital Management Tie: Empirical Evidence from Pharmaceutical Sector of Pakistan

Shafique Ahmed, Farhan Ahmed () and Sahabia Kanwal

Asian Journal of Empirical Research, 2018, vol. 8, issue 7, 259-270

Abstract: The importance of working capital management in generating the corporate profitability cannot be disregarded. This study aims to empirically investigate the impact of working capital management on the profitability of pharmaceutical sector of Pakistan. The study has taken secondary data covering a period of six years from 2011 – 2016. Current ratio, cash conversion cycle and current assets to total assets were taken as independent variables to represent working capital management and return on the asset taken as the dependent variable to represent corporate profitability. Through panel regression analysis, this study has found a significant impact of current ratio and cash conversion cycle and current assets to total assets have an insignificant impact on corporate profitability. These results give an insight of managing corporate profitability by considering current ratio and cash conversion cycle. This study should be beneficial for the pharmaceutical sector of Pakistan as performance and survival of this sector is important for investor and for the health of the general public.

Keywords: Working capital; Profitability; Cash conversion cycle (search for similar items in EconPapers)
Date: 2018
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