How profitability matters the working capital management?

The main purpose of this study is to evaluate the influence of working capital management on textile firm's profitability. For this purpose panel data of KSE listed 115 textile companies from 2006-2011 is used. In this study, researcher used ROA as proxy of dependent variable that is profitability of the firm. Current assets to total asset ratio and Current liabilities to total asset ratio are used as independent variables. Quick ratio and debt equity ratio are used as control variables. GLS Regression analysis applied to find out the relationship between working capital policies and profitability. So, results show that conservative working capital investment policy have positive influence on firm's profitability. And aggressive working capital financing policy is also influence the profitability. QR has also positive relation with profitability but debt equity ratio is negatively related. Textile area of Pakistan is very important and considerable because this area is more productive. That's why the management of resources and obligations are also important to enhance its productivity. So, this study is useful for textile management to increase their profitability.

Autorentext

Ashfaq Ahmad is a senior manager in the public sector, having extensive experience of management and teaching. His MBA dissertation won the award of the best research paper at 2nd International Applied Business Research Conference, Islamabad in 2009. Currently, he is completing his M.Phil. Management from UMT Lahore.