Impact of working capital management on profitability of textile firms listed in Lahore stock exchange, Pakistan
Author: Sultan Salahuddin

This study focus on the working capital management and the profitability. There are various studies on the importance of the working capital management. This study is conducted on the data of the textile firms listed in the Lahore stock exchange Pakistan. Four proxies (Account receivable turnover in days, account payable turnover in days, inventory turnover in days and cash conversion cycle) are used to measure the working capital, and the profitability is measure through the net operating variable that is only dependent variable in the study. Secondary data is collected from the annual reports of the textile firm for the last five years 2010 to 2014 as sample. On this time series panel data exploratory and confirmatory analysis are run. Descriptive statistics and trend analysis is used as Confirmatory analysis to explain the behavior and pattern of cross sectional observations. Trend analysis shows that there is negative trend in all of the proxies except of cash conversion cycle, of the working capital with the profitability that shows the relation between working capital and profitability. Correlation and fixed effect random model is run as Confirmatory analysis in the study. That also indicates that there is strong relation between the working capital and profitability. Account receivable turnover in days and inventory turnover in days are negatively related with profitability and both are also significant. Account payable is also negatively related but not significant .but in the given data cash conversion cycle cannot be proved negatively related with the profitability and it is also insignificant, as most of the analysis indicate that proxies are linked with profitability of the organization. So in the light of this study it is suggested that firm should focus on the optimal level of current assets and current liabilities to manage the profitability of the organization. Firm should focus on the account receivable collection and inventory turnover time period it should be minimum to earn maximum. Firms those focus on the working capital management can save itself from the risk of the solvency in short run and set higher profit in the long run. It is concluded that working capital is the key part of the success of the company. Supervisor: M.Ali Kemal

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Keywords : Capital management, Stock exchange, Textile firms
Supervisor: Muhammad Ali Kemal

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