The Impact of Working Capital Management on Firm Profitability : Evidence from Pakistan

Sohail, Ali; Quddus, Abdul

doi:10.35511/978-963-334-411-8_s5_sohail_quddus

Cited by 2 publications

(5 citation statements)

References 18 publications

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“…Results show that a rise in the cash conversion cycle would enhance the return on the company's assets. These findings are conformable with the study of Aqil et al (2019) and (Sohail and Quddos, 2021). Thus, based on these findings, hypothesis 2: a significant direct association exists between the working capital management components and return on asset, is accepted.…”

Section: Discussion Of Findingssupporting

confidence: 89%

“…It implies that managing the inventories effectively and selling them quickly can increase companies' return on asset. The stated positive relationship is conformable with the study of Shah (2018) and Sohail and Quddos (2021). Furthermore, receivable turnover is significantly and directly related to the response variable ROA; results indicate that effective credit management and collecting the receivables on time can enhance the return on company's assets.…”

Section: Discussion Of Findingssupporting

confidence: 85%

“…Furthermore, receivable turnover is significantly and directly related to the response variable ROA; results indicate that effective credit management and collecting the receivables on time can enhance the return on company's assets. These outcomes are conformable with the study of Aqil et al (2019) and Sohail and Quddos (2021). Similarly, the WCM component; that is, the cash conversion cycle, holds a significant direct association with the response variable return on asset.…”

Section: Discussion Of Findingssupporting

confidence: 85%

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Role of Working Capital Management in Enhancing Firm Profitability: An Empirical Study on the Manufacturing Companies of Pakistan

Tahir,

Baloch

2023

J. Econ. Impact

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Working capital management is a crucial instrument and one of the key aspects of any business management. It is considered as an accounting technique to maintain the organization's liquidity and financial balance and is regarded as a critical part of financial management in the company. This study emphasizes on investigating the role played by working capital management in enhancing the profitability of companies from the manufacturing sector listed in Pakistan stock exchange during the period 2018-2022. Return on equity and return on assets are used as the profitability measures; however, account receivable turnover, inventory turnover and cash conversion cycle are used as the measures of working capital management. To evaluate the results, the least square regression model is used. The results show that inventory turnover has a significant positive association with both ROA and ROE, which implies that inventory management and sales acceleration have a positive effect on the company's return on assets and return on equity. Similarly, the association of accounts receivable turnover with ROA and ROE is also significant and positive, demonstrating that good credit management and prompt receivables collection improve the return on equity and assets. The research also reveals a significant positive association of both ROA and ROE with the cash conversion cycle. Higher returns on assets and equity are connected with a higher cash conversion cycle. The results suggested that the managers should speed up the collection of receivables as quickly as possible and quickly sell the inventory so that the cash thus generated can be reinvested in productive assets, which can increase the company’s profitability. The study's findings provide an important guideline to financial managers in managing the appropriate level of working capital to enhance firms’ profitability.

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Section: Discussion Of Findingssupporting

confidence: 89%

Section: Discussion Of Findingssupporting

confidence: 85%

Section: Discussion Of Findingssupporting

confidence: 85%

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Role of Working Capital Management in Enhancing Firm Profitability: An Empirical Study on the Manufacturing Companies of Pakistan

Tahir,

Baloch

2023

J. Econ. Impact

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“…For the five years from 2018/2019 to 2022/2023, this paper explores the effect of working capital management and working capital management policies on the firm valuation of listed Sri Lankan companies on the CSE in Sri Lanka. In the concern about the impact of working capital management on firm's value of listed companies in Sri Lanka, there is a negative significant association between cash conversion cycle and firm's value measurement of listed companies in Sri Lanka which is supported by Bandara [65], Lai [66], Sabri [67], and Arachci et al [71]. According to Lai [66], the negative relationship can be explained as working capital management is related with liquidity of listed companies and when listed companies applies shorten cash conversion cycle, then it will improve liquidity and finally it will improve firm's value due to better liquidity [65].…”

Section: Discussionmentioning

confidence: 99%

“…Lai [66] explores the impact of working capital management on firm's value of 47 airline companies during the period of 2003 to 2011. The cash conversion period and market valuation are used to assess working capital management and the value of a company and findings state that strong negative correlation between the cash turnover time and the firm's valuation.…”

Section: Past Studies On Working Capital Management On Firm's Valuementioning

confidence: 99%

Working Capital Management and Working Capital Policies on Firm’s Value: A Special Reference to the Listed Companies in Sri Lanka

Delima

2023

AJEBA

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The aim of this paper is to investigate the influence between working capital management and firm value in the Sri Lankan context. This research has used pooled panel data of 475 observations from 95 listed firms across 18 sectors. Secondary data which are gathered from the annual report published by the CSE for the five years period from 2018/2019 to 2022/2023. The findings states that this model in the study explains a rise in the number of days in the cash conversion period decreased the firm's valuation by 43%. Further, working capital investment policy increases, or in other terms, the degree of WCIP’s aggressiveness rises, the firm value decreases, and increases in financing policy leads to decreases in firm value. This study includes both working capital investment policy and working capital financing policy with control variables in Sri Lanka. This research provides limited literature on working capital management, working capital policies, and firm value in Sri Lanka.

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The Impact of Working Capital Management on Firm Profitability : Evidence from Pakistan

Cited by 2 publications

References 18 publications

Role of Working Capital Management in Enhancing Firm Profitability: An Empirical Study on the Manufacturing Companies of Pakistan

Role of Working Capital Management in Enhancing Firm Profitability: An Empirical Study on the Manufacturing Companies of Pakistan

Working Capital Management and Working Capital Policies on Firm’s Value: A Special Reference to the Listed Companies in Sri Lanka

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