IMPACT OF WORKING CAPITAL MANAGEMENT ON THE PROFITABILITY OF KSE LISTED TEXTILE COMPANIES

Abstract

Purpose The most key verdict considered by the finance manager is the decision of working capital management. Profitability is directly affected by the working capital management and reflects as one ofthe most important portions of financial decision making. Methodology /Sample: This study is focused on the 9 textile firms which are Karachi stock exchange listed. Findings At the end ofthe research, the result revealed that the return on assets and receivables, payables and fixed assets ratio are positively related while the relationship between inventory and total assets ratio is negative. So the result shows that ifwe want to increase the profitability ofthe firm, we should delay the receivables as well as the payables while they should try to keep the inventory level at an optimal level. Practical Implication The working capital is defined by five independent variables that are receivable ratio, inventory ratio, payable ratio, fixed assets ratio and total asset ratio. However the profitability is determined by the dependent variable that is return on assets (ROA).