Working Capital Management and Profitability

The working capital management plays an important role for success or failure of firm in business because of its effect on firm’s profitability as well on liquidity. The working capital management refers to the management of working capital, or precisely to the management of current assets. A firm’s working capital consists of its investments in current assets, which includes short-term assets—cash and, inventories, receivable and marketable securities. Therefore, the working capital management refers to the management of the levels of all these individual current assets. The universe of the study is textile industry of Pakistan, which is one of the oldest and the fast developing industry in the large scale sector of Pakistan. The study is based on secondary data collected from listed firms in Karachi stock exchange for the period of 2001-2006 with an attempt to investigate the relationship existing between profitability, and working capital management components for listed firms in Karachi stock exchange. The reason for restricting to this particular time period is that the latest and updated data for investigation is available for this period.