The Effect of Working Capital Management on The Profitability of the Textile Industry: Evidence from Pakistan Textile Industry

Dr. Lala Rukh, Khursheed Ahmad, Sangeen Khan and Ikramullah
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Dr. Lala Rukh: Assistant Professor at CM&C university of Swat, Pakistan
Khursheed Ahmad: Lecturer at CM &C university of Swat, Pakistan
Sangeen Khan: Deputy Treasurer at University of Swat, Pakistan
Ikramullah: Student of MBA at University of Swat, Pakistan

Bulletin of Business and Economics (BBE), 2023, vol. 12, issue 4, 534-542

Abstract: The working capital management has significant importance in business investment because it impact on company’s Profitability and efficiency. The current study has taken the textile sector of Pakistan comprising of three sectors that is spinning weaving and composite comprising of 155 companies in total . The aim of the paper is to investigate the effect of working capital management on profitability of the textile firms. A sample of 20 businesses is randomly selected for a period of six years to carry out the current study. In the existing study ROA is taken as a measure of profitability of the firm. While the working capital is taken as the measure of the cash conversion cycle. Account receivable collection period Account payable time period size of the firm sales growth and current ration. Regression analysis is done and to address the issue of multicollinearity VIF test is done. The study's conclusions demonstrate that working capital utilization matters to Pakistani textile enterprises and that effective working capital utilization affects profitability. Studies show that when a company's inventory turnover period increases its profitability decreases. The prompt transformation of raw materials into final products has a significant impact on the profitability of the company. The analysis did not uncover any proof that profitability and the cash conversion cycle (CCC) were significantly correlated.

Keywords: cash conversion cycle; working capital management; profitability (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:rfh:bbejor:v:12:y:2023:i:4:p:534-542

DOI: 10.61506/01.00163

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