Impact of Working Capital Management on Firm’s Profitability: A Case from Food Sector of Pakistan (Published)
The main aim of this study is to investigate the relationship between working capital management (WCM) and firm’s profitability in the Food sector of Pakistan. WCM plays an important role in firm’s financial management decisions. An optimal (WCM) is expected to contribute positively to the creation of firm’s value and enhancement of its profitability. Return on assets (ROA) is used as dependent variable while different independent variables are also used. Working capital, current asset to total asset ratios’ debt to equity ratio, current ratio and capital size of the firm are used independent variables. These variables are also used to investigate their effect on profitability (net income). A sample size of 5 major food companies in Pakistan has been selected from balance sheet analysis of state bank of Pakistan for a period of five years, from 2012 to 2016. The relationship between (WCM) efficiency and profitability is examined using correlation, regression analyses. The results show a strong positive significant relationship between (WCM) and firm’s profitability in Pakistan’s Food sector.