Working Capital Management And Profitability An Empirical Analysis Of Listed Companies Of Cement Sector Of Pakistan

Abstract

In this research, the relationship between working capital management and profitability has been explored, by selecting 12 cement companies of Pakistan listed on KSE, for the period of 5 years from 2005-2009. This study also examined the effect of selected variables of working capital management including Cash Conversion Cycle, Current Ratio, Average Collection Period and Inventory Turnover in Days and Debt Ratio on the Net Operating Profitability of these companies. Pearson’s correlation and Regression analysis has been applied and results show that there is a negative relationship between cash conversion cycle, current ratio, debt ratio and net operating profitability of cement companies of Pakistan and it has been also found that average collection period and inventory turnover in days have no significant relationship with net operating profitability. The way in which companies manage their working capital directly affects their liquidity as well as profitability.