Abstract:
Purpose
The aim of this study is to evaluate the impact of working capital and its components on the
profitability of the textile companies listed in the Karachi stock exchange (KSE). This study
provides an intense awareness of the working capital for the selected textile companies which
has a significant influence on their profitability.
Methodology
This research study is explanatory, cause and effect and descriptive. This study involved use of
secondary data and the data is collected from the annual reports and financial statements of the
textile companies for the period of ten-years 2006-20137 To analyze the data, Descriptive
statistics, Regression, ANOVA and coefficient tested were applied by using SPSS software.
The independent variables working capital, number of days’ inventory, number of days’ account
receivable, number of days’ account payable and cash conversion cycle are tested in order to
check their impact and relationship on the dependent variable profitability. Profitability is
measured by Net income, Return on assets and Return on equity.
Findings
The comparative results and analysis ofthis research study clearly proposed that the profitability
of textile companies is influenced by the changes made in the working capital. The result ofthe
descriptive statics and regression analysis shows that the working capital has a significant impact
on the profitability, while the other independent variables such as components have insignificant
impact on the profitability ofthe textile companies.
Practical Implications
The outcomes of this research study might help to the managers and financial experts of the
textile companies in order to efficiently manage the working capital which will directly affect the
profitability ofthe company.
