Premium Essay

Impact of Working Capital in Textile Firms Profitability

In: Business and Management

Submitted By robi0171
Words 2867
Pages 12
Interdisciplinary Journal of Research in Business

ISSN 2046-7141
Vol.3, Issue.10, (pp.30- 36) | 2015

WORKING CAPITAL MANAGEMENT AND PROFITABILITY IN SUGAR INDUSTRY
OF PAKISTAN
Muhammad Ehsan Javaid Leghari
PhD Management Sciences
COMSATS Institute of Information Technology Islamabad, Pakistan
Email:muhammadehsanjavaid@yahoo.com

ABSTRACT
Working capital management is necessary for profitability. In this study working capital management of sugar industry and its impact on profitability is checked from 2002 to 2012. Total observations are 308 while 28 companies listed at Karachi Stock Exchange are in sample. Correlation and pooled panel data regression analysis is performed. Results show that day’s inventory, cash conversion cycle, cash ratio, account receivable to sale ratio, short term investment ratio, secured short term obligation and fixed asset ratio are negatively affecting profitability of firm. Whereas quick ratio, days account receivable and working capital are positively affecting profitability.
Key words: Return on Asset, Cash Conversion Cycle, Secured Short Term Obligations, Cash Ratio, Account
Receivable to Sale

INTRODUCTION
In finance field two extensively examined areas are capital structure and working capital management. It is matter of great importance both for researchers and corporate individuals to figure out firm’s value and profitability. Working capital management has a direct impact on the firm profitability along with reducing the liquidity risk. Liquidity is one face of coin and profitability is other. It clarify that working capital management is directly proportional of firm profitability. US financial crises highlighted problems in already identified factors for working capital management.
Introduction of Basel 3 accord also directed us toward working capital management to hold liquidity in financial sector. Current business world is...

Similar Documents

Free Essay

Research Paper

...Impact of Working Capital Management on Profitability 1 IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY Impact of Working Capital Management on Profitability of Textile Sector of Pakistan Sumaira Tufail Hailey College of Commerce University of the Punjab, Lahore Sumaira_08sep@yahoo.com This paper has been presented in the organized by School of Business and Economics University of Management and Technology, Lahore, Pakistan This paper has been included in the conference proceedings with good intentions, where the conference and its organizers are not liable at all for the contents of this paper and / or any part of it. For more information about the conference please visit the conference website: http://cgr.umt.edu.pk/icobm2013/index.html or write the organizers at icobm@umt.edu.pk Proceedings of 3rd International Conference on Business Management (ISBN: 978-969-9368-07-3) Impact of Working Capital Management on Profitability 2 ABSTRACT Working capital can be considered as source of existence for a financial body and management of working capital is regarded as one of the most essential part of business management. This study aims to find out the impact of working capital policies on profitability. Return on assets is used as a measure of profitability. Current assets to total assets ratio is used to compute the investment policy of working capital management and to determine financing policy of working capital management current liabilities to total assets......

Words: 11096 - Pages: 45

Free Essay

Relationship Between Capital Structure and Ownership Structure: a Comparative Study of Textile and Non Textile Manufacturing Firms

...between Capital Structure and Ownership Structure: A Comparative Study of Textile and Non Textile Manufacturing Firms Muhammad Arslan* M.Phil (Management Sciences) Bahria University Islamabad, Pakistan, PO box 44000, E-8, Islamabad, Pakistan Email: MuhammadArslan73@gmail.com Rashid Zaman M.Phil (Management Sciences), Bahria University Islamabad, Pakistan Email: Rashidzamantanoli@gmail.com Abstract The current study explores the impact of ownership structure on capital structure in textile sector and rest of the manufacturing sectors (non-textile) in Pakistan using regression analysis with fixed effect model. As textile sector is the largest manufacturing sector in Pakistan and having diversified financial characteristics, however, there exists a gap whether textile sector’s ownership and capital structure relationship matches with other manufacturing sectors or not. Current study tries to fill this gap. The results indicate that in textile sector, no significant relationship exists between ownership concentration and capital structure whereas a significant negative relationship is found between these two variables in case of non-textile firms in Pakistan. However, institutional ownership variable was found to be non-significant in both textile and non-textile sectors. Other control variables were found to have the results as hypothesized. Period of study used in this study is 2006-2009 and sample comprises of KSE listed firms. Keywords: Ownership concentration, capital......

Words: 7578 - Pages: 31

Free Essay

Performance of Textile Industry in Industrialisation: a Study with Reference to India

...PERFORMANCE OF TEXTILE INDUSTRY IN INDUSTRIALISATION: A STUDY WITH REFERENCE TO INDIA INTRODUCTION Prosperity of any nation is extremely difficult without industrial development – is a well established truth for all the economies – developing or developed. Economic development and industrialization have became so closely integrated with each other that progress of an economy is now accessed from the success it has achieved in transformation from agricultural set up into a industrial set up. Through industrialization a situation is created whereby many industries are set up rapidly and ultimately backward areas are converted into economically developed areas and backward economies into developed economies. Industrialization, infact is a composite term which involves a number of structural changes such as changes in the production techniques, factor intensities, industrial employment and output. Industrialization is not only a way to increase output or national income but is a means of introducing modern technology and changing ways of life and finally the structure of the economy because of its self-reinforcing quality. But the all above cannot be executed without a well planned industrial policy. The industrial polity provides direction to the pace of industrialization and industrial development. Hence, to industrialize the country, India too, framed industrial policy which was amended, modified and reoriented several times. The First Industrial Policy was framed in......

Words: 6332 - Pages: 26

Premium Essay

Jhgjghj

...The prime objective of the study is to produce learner’s practical knowledge in organizational environment and we can tune up ourselves for the job market interview session in future. We are able to collect information from “Square Textile Limited” to complete the study. We survey in our way to know about their working capital management procedure. Our main concentration of this study is to find out how organizations generally manage their capital. So we make organizational profile, consider the cash collection, financing, and liability related functions and also take some knowledge from internet. We hope that our work will be benefitted for everyone because we tried our best to make the report effective. Chapter one Introduction Introduction: Working capital management is one of the major issues of corporate finance. The success of any manufacturing company largely relies on the efficient management of working capital. There are different theoretical developments and empirical issues but there is no unified rule that can determine the optimal level of working capital. From the viewpoint of developing country like Bangladesh the role of working capital should be highly emphasized. But our country is characterized by low level of capital market development and inefficiency of financial market. In such a situation, it...

Words: 4295 - Pages: 18

Premium Essay

Casestudy

...htm Working Capital Management and Corporate Performance of Manufacturing Sector in Pakistan Abdul Raheman PhD Scholar, Department of Management Sciences, COMSATS Islamabad & Asst. Professor, University Institute of Management Sciences PMAS-Arid Agri. University Rawalpindi E-mail: abdulrehman@uaar.edu.pk Talat Afza Professor & Dean, Faculty of Management Sciences, COMSATS Lahore, Pakistan E-mail: talatafza@ciitlahore.edu.pk Abdul Qayyum Professor / Registrar, Pakistan Institute of Development Economics, Islamabad E-mail: abdulqayyum@pide.org.pk Mahmood Ahmed Bodla Professor & Director, COMSATS Sahiwal, Pakistan E-mail: director@ciitsahiwal.edu.pk Abstract Working capital management plays a significant role in better performance of manufacturing firms. This paper analyzes the impact of working capital management on firm’s performance in Pakistan for the period 1998 to 2007. For this purpose, balanced panel data of 204 manufacturing firms is used which are listed on Karachi Stock Exchange. The results indicate that the cash conversion cycle, net trade cycle and inventory turnover in days are significantly affecting the performance of the firms. The manufacturing firms are in general facing problems with their collection and payment policies. Moreover, the financial leverage, sales growth and firm size also have significant effect on the firm’s profitability. The study also concludes that firms in Pakistan are following conservative working capital......

Words: 7443 - Pages: 30

Premium Essay

Impact of Earning Managment

...ISSN 2222-2839 (Online) Vol.7, No.28, 2015 www.iiste.org Impact of Firm Size on Earnings Management; A Study of Textile Sector of Pakistan Usman Ali MS Business Administration National University of Modern Languages (NUML) Islamabad, Faisalabad Campus Muhammad Afzal Noor Lecturer Department of Management Sciences National University of Modern Languages (NUML) Faisalabad Campus Muhammad Kashif Khurshid Lecturer Department of Management Sciences National University of Modern Languages (NUML) Faisalabad Campus Akhtar Mahmood MS Business Administration National University of Modern Languages (NUML) Islamabad, Faisalabad Campus Abstract The study was conducted to evaluate the impact of firm size on earnings management for the textile sector of Pakistan. For this purpose annual ten years data was obtained from 2004 to 2013 for fifty selected firms from the textile sector of Pakistan. Natural logarithm of total assets was used as the proxy of firm size. On the other hand earning management was the dependent variable of this study. Earnings management was measured through discretionary accruals by using modified Jones model. Descriptive statistics, correlation and panel data analysis was used for capturing the impact of firm size on earnings management. The statistical results of this study revealed that there is positive and significant impact of firm size on earnings management. Keywords: Firm Size, Discretionary Accruals, Earnings Management, Karachi......

Words: 7278 - Pages: 30

Premium Essay

Summer Training Report

... DBIM, VNSGU PREFACE In this development and changing world, I feel proud for being a student of MBA full time course offered by DEPARTMENT OF BUSINESS AND INDUSTRIAL MANAGEMENT, VEER NARMAD SOUTH GUJARAT UNIVERSITY, SURAT. This report states about the all the departments and their workings policies at the ALOK INDUSTRIES LTD, PROCESSING PLANT BALITHA, TALUKA PARDI, VALSAD Finance and Function of Finance are the part of Economic activities. As this report also include the Financial Ratio Analysis which checks upon the efficiency of the firm. Ratios indicate the trend or progress or downfall of the firm and are aid to measure financial solvency. This project start with industry analysis, introduction of the company and organization, four major departments of the firm they are finance, marketing, production and human resource. Which are included in general training part and specific research includes concept definition, literature review, objective of the research, research methodology, limitation of research, and the ratio analysis of various ratios, and suggestion. I am sure that this project report would give us enough food for covering different departments of the firm and also the various ratios. I have collected all the needed information for the project report at my best level and...

Words: 14361 - Pages: 58

Premium Essay

Ratio Analysis

...A PROJECT REPORT ON “RATIO ANALYSIS” AT INDIAN RAYON (A UNIT OF ADITYA BIRLA NUVO LTD) VERAVAL (GUJARAT) SUBMITTED TO TILAK MAHARASHTRA UNIVERSITY IN PARTIAL FULFILLMENT OF 2 YEARS FULL TIME COURSE MASTER OF BUSINESS ADMINISTRATION (MBA) Submitted By: KAAT RAFIK O. (Batch 2008-10) Guided By: Prof.R.GANESHAN MAHARASHTRA COSMOPOLITAN EDUCATION SOCIETY‘S PAI INTERNATIONAL CENTRE FOR MANAGEMENT EXCELLENCE CAMP- PUNE-411001 1 CERTIFICATE This is certify that KAAT RAFIK OSMAN BHAI student of PAI international centre for management excellence, Maharashtra Cosmopolitan Education society, Pune has completed his field work report on the topic of RATIO ANALYSIS AT INDIAN RAYON (A UNIT OF ADITYABIRLA NUVO LTD) VERAVAL(GUJARAT) and has submitted the field work report in partial fulfillment of MBA of the college for the academic year 20082010. He has worked under our guidance and direction. The said report is based on bonafide information. Project guide name Prof. R Ganesan Designation Director 2 PAI INTERNATIONAL CENTRE FOR MANAGEMENT EXCELLENCE Maharashtra Cosmopolitan Education Society DECLARATION I hereby declare that project titled ―RATIO ANALYSIS‖ is an original piece of research work carried out by me under the guidance and supervision of prof. R Ganesan. The information has been collected from genuine &authentic sources. The work has been submitted in partial fulfillment of the requirement of MBA to our......

Words: 9436 - Pages: 38

Premium Essay

Indian Rayon Project

...A PROJECT REPORT ON “RATIO ANALYSIS” AT INDIAN RAYON (A UNIT OF ADITYA BIRLA NUVO LTD) VERAVAL (GUJARAT) SUBMITTED TO TILAK MAHARASHTRA UNIVERSITY IN PARTIAL FULFILLMENT OF 2 YEARS FULL TIME COURSE MASTER OF BUSINESS ADMINISTRATION (MBA) Submitted By: KAAT RAFIK O. (Batch 2008-10) Guided By: Prof.R.GANESHAN MAHARASHTRA COSMOPOLITAN EDUCATION SOCIETY‘S PAI INTERNATIONAL CENTRE FOR MANAGEMENT EXCELLENCE CAMP- PUNE-411001 1 CERTIFICATE This is certify that KAAT RAFIK OSMAN BHAI student of PAI international centre for management excellence, Maharashtra Cosmopolitan Education society, Pune has completed his field work report on the topic of RATIO ANALYSIS AT INDIAN RAYON (A UNIT OF ADITYABIRLA NUVO LTD) VERAVAL(GUJARAT) and has submitted the field work report in partial fulfillment of MBA of the college for the academic year 20082010. He has worked under our guidance and direction. The said report is based on bonafide information. Project guide name Prof. R Ganesan Designation Director 2 PAI INTERNATIONAL CENTRE FOR MANAGEMENT EXCELLENCE Maharashtra Cosmopolitan Education Society DECLARATION I hereby declare that project titled ―RATIO ANALYSIS‖ is an original piece of research work carried out by me under the guidance and supervision of prof. R Ganesan. The information has been collected from genuine &authentic sources. The work has been submitted in partial fulfillment of the requirement of MBA to our......

Words: 9435 - Pages: 38

Premium Essay

Front Page Bade.Doc

...CHAPTER-1 1.1 INTRODUCTION The textile sector played a very important role in many developed /developing countries. In Bangladesh this sector has also contributed as well as still contributing towards the development of the socio-economic condition of the general masses. Textile industry has made substantial progress and has continued to contribute to the national economy, both by reducing imports and increasing exports. The existing scenario of the textiles sector is presented below: • Textile sector contributes around 38% of the industrial value addition and earns about 75% of the total export earni9ngs of the country. • Around 4.5 million workforces are engaged in the textiles sector of which 50% are poor women. • In the 1990’s value addition in the RMG (ready made garments) was 20% which by now stands at around 45%. • Around 25% of the total demand of the woven fabrics for the export oriented RMG is supplied by the local weaving mills & the 40% of the fabrics requirements of the cotton woven RMG exports are met by local mills. • 90% of the domestic fabrics and yarn requirements are met by our primary textiles sector (PTS). [SOURCE: Page: 21, annual report 2005, BTMA]. The primary textile sector (PTS) is meeting the major demand of yarn & fabrics of the local markets. In addition to that a significant part of the demand of fabrics of export oriented RMG units is being met by the PTS. With gradual increase in population and expansion of......

Words: 15193 - Pages: 61

Premium Essay

Analysis and Interpretation

... Business concern needs finance to meet their requirements in the economic world. Any Kind of business activity depends on the finance. Hence, it is called as lifeblood of business organization. Whether the business concerns are big or small, they need finance to fulfil their business activities. In the modern world, all the activities are concerned with the economic activities and very particular to earning profit through any venture or activities. The entire business activities are directly related with making profit. (According to the economics concept of factors of production, rent given to landlord, wage given to labour, interest given to capital and profit given to shareholders or proprietors), a business concern needs finance to meet all the requirements. Hence finance may be called as capital, investment, fund etc., but each term is having different meanings and unique characters. Increasing the profit is the main aim of any kind of economic activity. MEANING OF FINANCE: Finance may be defined as the art and science of managing money. It includes financial service and financial instruments. Finance also is referred as the provision of money at the time when it is needed. Finance function is the procurement of funds and their effective utilization in business concerns. DEFINITION OF FINANCE: According to Khan and Jain, “Finance is the art and science of managing money”. Webster’s Ninth New Collegiate Dictionary......

Words: 3387 - Pages: 14

Premium Essay

Capstone Project

...LOVELY PROFESSIONAL UNIVERSITY DEPARTMENT OF MANAGEMENT Report on Capstone Project “Impact of financial risk on capital structure decision in cement industry of India” Submitted to Lovely Professional University In partial fulfilment of the Requirements for the award of Degree of Master of Business Administration Supervisor: Mr. Rohit Bansal Submitted by: Shalini Sahay 10808654 Khalid Anwar 10805151 Suman Saurabh 10808885 Varun Kakkar 10810014 Gurpreet Singh 10806126 DEPARTMENT OF MANAGEMENT LOVELY PROFESSIONAL UNIVERSITY JALANDHAR NEW DELHI GT ROAD PHAGWARA PUNJAB 1 CERTIFICATE This is to certify that the project report titled “Impact of financial risk on capital structure in cement industry of India” carried out by Miss. Shalini sahay has been accomplished under my guidance & supervision as a duly registered MBA student of the Lovely Professional University, Phagwara. This project is being submitted by him/her in the partial fulfilment of the requirements for the award of the Master of Business Administration from Lovely Professional University. Her dissertation represents her original work and is worthy of consideration for the award of the degree of Master of Business Administration. ___________________________________ (Name & Signature of the Faculty Advisor) Date: 2 CERTIFICATE This is to certify that the project report titled “Impact of financial risk on capital structure in cement industry of India” carried out by Mr.Khalid anwar......

Words: 10807 - Pages: 44

Premium Essay

Factors Affecting the Performance of Micro and Small Enterprises in Arada and Lideta Sub-Cities, Addis Ababa

...Factors Affecting the Performance of Micro and Small Enterprises in Arada and Lideta Sub-Cities, Addis Ababa By Admasu Abera A Thesis submitted to the school of graduate studies of Addis Ababa University in partial fulfillment of the requirements for the Master of Business Administration (MBA) degree Addis Ababa University Addis Ababa, Ethiopia October 2012 Factors Affecting the Performance of Micro and Small Enterprises in Arada and Lideta Sub-Cities, Addis Ababa By Admasu Abera A Thesis submitted to the school of graduate studies of Addis Ababa University in partial fulfillment of the requirements for the Master of Business Administration (MBA) degree Addis Ababa University Addis Ababa, Ethiopia October 2012 Declaration I, the undersigned, declare that this study entitled “Factors Affecting the Performance of Micro and Small Enterprises in Arada and Lideta sub-cities, Addis Ababa” is my own work. I have undertaken the research work independently with the guidance and support of the research advisor. This study has not been submitted for any degree or diploma program in this or any other institutions and that all sources of materials used for the thesis have been duly acknowledged. Declared by Name: Admasu Abera Signature: _____________ Date: October 2012 Place: Addis Ababa, Ethiopia Advisor: Fesseha Afewerk (Ast. Prof.) Signature: ______________ Date: __________________ Addis Ababa University School of Graduate Studies This is to certify......

Words: 22269 - Pages: 90

Premium Essay

Business

...business environment, which consists of the economic aspect, the socio-cultural aspects, the political framework, the legal aspects and the technological aspects etc. In this chapter, we shall learn about the concept of business environment, its nature and significance and the various components of the environment. In addition, we shall also acquaint ourselves with the concept of social responsibility of business and business ethics. OBJECTIVES After studying this lesson, you will be able to: ? explain the meaning of business environment; ? identify the features of business environment; ? describe the importance and types of business environment; ? describe the recent developments in Indian Economy that have greatly influenced the working of business units in India; ? explain the concept of social responsibility of business; ? state the social responsibility of business towards different interest groups; and ? explain the concept of business ethics. 3.1 MEANING OF BUSINESS ENVIRONMENT As stated earlier, the success of every business depends on adapting itself to the environment within which it functions. For example, when there is a change in the government polices The term 'business environment implies those external forces, factors and institutions that are beyond the control of individual business organisations and their management and affect the business enterprise. It implies all external forces within which a business...

Words: 2296 - Pages: 10

Free Essay

Textile Insdutries Guatemala and India

...investigative document presents an overview of the textile industries in two emerging countries: Guatemala and India. The document analyses, compares and contrast the differences in the institutional structures of both countries and offers specific details and analysis of the textile industries for local and international businesses. Guatemala Republic of Guatemala is located in Central America bordered by Mexico to the North, the Pacific Ocean to the southwest, and Belize to the North East Honduras and El Salvador to the southeast. The country is mountainous with small desert and sand dune patches, having many hills filled with people, except for the south coastal area and the vast northern lowlands of Petén department. Two mountain chains enter Guatemala from west to east, dividing the country into three major regions: the highlands, where the mountains are located; the Pacific coast, south of the mountains; and the Petén region, north of the mountains. All major cities are located in the highlands and Pacific coast regions; by comparison, Petén is sparsely populated. These three regions vary in climate, elevation, and landscape, providing dramatic contrasts between hot and humid tropical lowlands and colder and drier highland peaks. Volcán Tajumulco, at 4,220 meters, is the highest point in the Central American states. Demographics Guatemala is a country of youth; 70% of its population is less than thirty years old. The capital city, Guatemala, is located......

Words: 4120 - Pages: 17