The Effect of Working Capital Management on The Profitability of the Textile Industry: Evidence from Pakistan Textile Industry
DOI:
https://doi.org/10.61506/01.00163Keywords:
cash conversion cycle, working capital management, profitabilityAbstract
The working capital management has significant importance in business investment because it impact on company’s Profitability and efficiency. The current study has taken the textile sector of Pakistan comprising of three sectors , that is spinning weaving and composite comprising of 155 companies in total . The aim of the paper is to investigate the effect of working capital management on profitability of the textile firms. A sample of 20 businesses is randomly selected for a period of six years to carry out the current study. In the existing study ROA is taken as a measure of profitability of the firm. While the working capital is taken as the measure of the cash conversion cycle. Account receivable collection period, Account payable time period size of the firm sales growth and current ration. Regression analysis is done and to address the issue of multicollinearity VIF test is done. The study's conclusions demonstrate that working capital utilization matters to Pakistani textile enterprises and that effective working capital utilization affects profitability. Studies show that when a company's inventory turnover period increases, its profitability decreases. The prompt transformation of raw materials into final products has a significant impact on the profitability of the company. The analysis did not uncover any proof that profitability and the cash conversion cycle (CCC) were significantly correlated.
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