Working Capital Management and Firm Performance: Evidence from Pakistan

Abstract

Study analyzes the effect of the proper management of working capital on financial performance of cement sector in Pakistan. The sample period of the study is five years i-e from 2007 to 2011. The data was taken from dissimilar sources that used in this study from Karachi Stock Exchange, Published reports of SBP and respected firm site. The dependent variable of the study is Return on assets which is used as a proxy for firm financial performance.  There are independent variables are account receivable in days, inventory turnover in days, (CCC) and payable turnover in days. Panal Data methodology used to analyze the impact of Working Capital Management on performance or profitability of Cement sector. Results derived that CCC, Net Trading Cycle, Number of Days  Receivable has strongly positive relation with performance and these are significant whereas,  Number of Days Inventory turnover and Number of days payable turnover in Days have negative relation with firm performance and is insignificant.

Keywords: Cash Conversion Cycle, Net Trade Cycle, Receivable Turnover in Days, Inventory Turnover in Days & Payable Turnover in Days.