WORKING CAPITAL MANAGEMENT AND PROFITABILITY CASE OF PAKISTANI SUGAR FIRMS LISTED IN KARACHI STOCK EXCHANGE

S Shabib-Ul-Hasan and Ijaz Hussain
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S Shabib-Ul-Hasan: Department of Public Administration, University of Karachi, Pakistan.
Ijaz Hussain: Hamdard Institute of Management Sciences, Hamdard University, Karachi, Pakistan.

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Abstract: The success or failure of an organization depends on the effective management of working capital as it directly affects the liquidity and profitability of any organizations. Working capital is required to meet the daily expenditures to run the business operations smoothly. The main purpose of the study is to investigate the impact of working capital components on sugar firms profitability listed in Karachi Stock Exchange (KSE) for a period of 7 years. In order to examine the relationship gross operating profit is taken as dependent variable and receivable conversion period, inventory holding period and account payable conversion period consider as independent variable. The secondary data for the period of 2008 to 2014 was taken from the annual financial statements of sugar firms. The regression and correlation analysis were used and it is based on a panel sample of 20 sugar firms. The results show that elements of working capital i.e. number of days account receivable turnover, number of days inventory turnover and number of days account payable turnover has negative impact on profitability of sugar firms. Therefore the finance management team can increase the value of share holder by managing perfectly each component of working capital.

Date: 2017-05-24
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Published in Journal of Global Economics, Management and Business Research, 2017, 9 (2), pp.46-51

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05364029

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