final project_working capital management_cons

8/4/2019 Final Project_Working Capital Management_Cons

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Working Capital Management and Profitability: The

examination of the interrelationship between profitability and

working capital, with the assistance of ratio analysis

Submitted By: Constantinos Constantinou (U104N0905)

Course: MBA-726WORKING CAPITAL MANAGEMENT

Name of Instructor: Dr. Petros Lois


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Table of contents Page

1. Introduction ............................................................................................

2. Literature review ..................................................................................

3. Research Methodology .........................................................................

4. Analysis of findings ................................................................................

5. Conclusion ..............................................................................................

6. References ...............................................................................................

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ABSTRACT

The current study investigated the interrelationship between profitability and workingcapital and more specific with the components of cash conversion cycle. Researchers haddiscovered the significance of the subject and a number of studies have been carried out

all over the world. Field of study was USA listed manufacturing companies. The datawere collected from 38 companies for the period 2001-2010. The data were analyzedusing descriptive statistics, Pearson correlation coefficients and ordinary regressionsanalysis. The results indicated a negative connection between profitability, expressed asreturn on Assets, and the receivable collection period, average inventory period andaverage payment period, and also the cash conversion cycle which expresses theefficiency of working capital. Furthermore, financial leverage linked inversely withprofitability and positive with sales growth. The above results are an indicator thatmanagers should adopt an efficient management of working capital in order to achievedmaximum profitability.

1. INTRODUCTION

Working capital management is an aspect of firms finance, which is related to thecompanys current assets, accounts receivables, inventory and current liabilities through

current payables.

Investors worldwide are investing in a company to get some return on their investment.After all, companies should operate to contribute to the shareholder wealth. Bigmultinational companies management are operating by the directors and managers thatappointed from the shareholders. Owners of the company are expecting from theirrepresentatives to act in a way, in order the value of the company will increase andtherefore, their investment in the company will have a return.

In the past years most of the researches were concentrate in the aspects of long terminvestment and capital structure in order to examine the performance of the companiesand to give an indicator what influence their profitability. However, through of series ofstudies, it was proven that the management of working capital (receivables, inventory,payables) have significant influence in firms profitability. Nazir & Afza (2008) statedthat decisions concerning working capital are vital, because they are proving the financialstability of a business and market growing perception about the firm accordingly.

Management o f working capital is important for every company. All over the worldresearches study the issue in the framework of many countries. In developing countries,researchers came to the conclusion that working capital is probably the most importantfactor for a company to succeed. The same is for the companies in the developedcountries, such as in USA where the field of my study is.


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For a manager to effectively create value through the management of the working capitalshould not concentrate only in the management of current assets (inventory managementand account management requirements) ,but also cover the management of current

liabilities as Lazaridis & Tryfonidis (2006) point out. A good policy in the direction ofworking capital can create value for the shareholders. In contrast, an inefficiency policymight affect the company in a dreadful direction and could cause financial hardship. AsNazir & Afza (2008) indicated, this failure in the management of working capital willlead to the failure of the long term planning of the company and therefore to the lostshareholder wealth.

Most vital aspect of working capital is current assets. The strategy that the companyadapt against working capital is mostly depended from the level of current assets. Lowlevel of current assets can be contribute more effectively to the profitability of acompany, however this is a risky option, as the possibility of the company to not meet its

financial obligations are greater. A different approach can be followed by increasing theamount of current assets against current liabilities. This will reduce the danger of theprevious strategy of a company to fail to meet its financial obligation, however it willcontribute to the reduction of companys profitability (Afza & Nazir, 2008).

Working capital policy aim is to ensure that current assets liquidity meet the needs ofcurrent liabilities. Liquidity is the guideline of how efficient a company can meet itscurrent liabilities. A company must have a sufficient level of liquidity, due to excessiveliquidity results in inactive funds that do not create any value. On the other hand, as Shah& Vishnani (2007) indicated, low liquidity could lead to lack of resources and in result todefault, therefore, creates financial hardship. Brian (2009) defines working capital policy,as a policy which creates a balance of cash flows, i.e. the same level of cash inflows andoutflows. This cash flow will help to manage the affairs of the company in an efficientmanner. However, in order to establish such a policy, managers should first properunderstanding the driving forces of working capital.

Lamberson (1995) referred that a good understanding of these drivers and their role assistmanagers to reduce the risk of default and to enhance performance. The efficientmanagement of receivables, payables and inventory contributes to the increase of theprofitability of a company. All these are elements of working capital and poormanagement of these elements may lead to failure of the companys targets.

As the increase of profitability is directly connected with the increase of the companyturnover, in the same time an amount is need to be invested in working capital. Deloof(2003) stated that the result of this increased profitability may disappear if the cost ofhigher investment in working capital overcomes its benefits.


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Therefore, the main goal of the working capital management is to maintain this level ofcash inflow and cash outflow that would create balance between each element of workingcapital. Without such a balance is impossible to move or bring businessesfunction in a proper way. In addition, a reliable and incessant monitoring of componentsof working capital is required in order to achieve such balance. However as Filbeck &

Krueger (2005) and Lamberson (1995) stated, failed of managers to manage effectivenessthis cash inflow and outflow will lead to used lot of their time to balance the level ofshort term assets with that of short term liabilities.

Working capital management has an effect on the profitability of the business and there isa relationship between the working capital management and the profitability of acompany. Cash Conversion Cycle is a useful measure to examine this relationship. CashConversion Cycle is calculated as number of days accounts receivable + number of daysinventorynumber of days accounts payable. The goal of the current study is to examinethe relationship between cash conversion cycle and its components, receivables,inventory and payables days, with the profitability of the companies as expressed by

Return on Assets. Data collected for this study from US listed manufacturing companiesfor a period of ten years, 2001-2010. This paper is structured as follows: firstly theliterature about the relationship between working capital management and profitability,then the research methodology, analysis of findings and conclusion on the findings.


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2. LITERATURE REVIEW

The current study investigates the interrelationship between profitability and workingcapital. Below are referred some studies and their results were investigated the samesubject.

Shin and Sonen (1998) examined the connection between net trade cycle (workingcapital) and the profitability. Their sample was consisted from 58,985 firms for the period1975 to 1994. Their result indicated that firms net trade cycle and its profitability have a

strong negative correlation. The result of this relationship, is that financial managersshould take in to consideration to reduce in an efficient way net trade cycle in order toincrease profitability and contribute to shareholder wealth.

Athens stock exchange was the field of study for Lazaridis and Tryfonidis (2006). Theyexamined 131 listed companies for the period of 2001-2004. Their centre of theirresearch was to investigate the impact of efficient working capital management on

profitability. Gross operating profit was used to determine profitability. For their researchthey used Cash Conversion Cycle, size of the company, fixed financial assets andfinancial debt ratio as independent variable. The result shows that a negative connectionis existing between Cash Conversion Cycle and profitability.

Cash Conversion Cycle was also used as a measure of working capital management byDeloof (2003) to study the link between working capital management and companiesprofitability. His result point out a important inverse relation between gross operatingincome and the number of days accounts receivable, inventories and accounts payable.He used as a sample 1009 large Belgian non-financial firms, examined the periodbetween 1992-1996. In his conclusion mentioned that managers can create value for theirshareholders by decreasing the number of days accounts receivable and inventories to anacceptable minimum.

In Christopher and Kamalavalli (2009) study, they examined a sample of 14 corporatehospitals in India using panel data analysis for the period from 1996 up to 2006. Theyused as independent variables current ratio, quick ratio, inventory turnover ratio, workingcapital turnover ratio, receivables turnover ratio, ratio of current asset to total asset, ratioof current asset to operating income, comprehensive liquidity index, net liquid balancesize, leverage and growth. The dependent variable to measured profitability was Returnon Investment. By using multiple regression analysis, they found a negative correlationbetween Return on Investment and current ratio, cash turnover ratio, current asset tooperating income and leverage. Positive connection with Return on Investment were hadquick ratio, receivables turnover ratio, current asset to total asset and growth rate.Conclusion is that hospitals should focus more on competent use of working capital forgrowing the profitability which would enlarge the worth of hospitals.

Ganesan (2007) investigated 349 firms from Telecommunication & Equipment industryover the period of 2001-2007. In his conclusion mentioned that despite an inverse


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correlation exists between firms working capital efficiency and their profitability, thisrelationship was not significant in the Telecommunication & Equipment industry.Uyar (2009) analyzed 166 Turkish corporation registered with Istanbul Stock Exchangeto investigate the connection of Cash Conversion Cycle with profitability and size for theyear 2007. As indicated by the result, Cash Conversion Cycle has strong negative

relationship with size and profitability of the companies.

Azhar & Noriza (2010) have selected 172 Malaysian firms in a random way in order toassess the consequence of Working Capital Management on the firm profitability andmarket value. Results demonstrate a strong negative relationship between working capitalvariables and firms performance.

Shah and Sana (2006) investigated the oil and gas sector of Pakistan. In their conclusionsare referring that a negative correlation between Gross Profit and working capital ratiosexists, except for the average payment period which is positively related to gross profit.

A sample of 94 Pakistani firms listed on Karachi Stock Exchange for a period of 6 yearsfrom 1999-2004 was selected from Raheman and Nasr (2007) to conduct their research.They study the influence of average receivables days, average inventory days, averagepayables days and cash conversion cycle on the net operating profitability. Their resultindicated that there was a negative relations between the components of working capitalmanagement (average receivables days, average inventory days, average payables daysand cash conversion cycle) and profitability. The result show in addition that size of thefirm, expressed by natural logarithm of sales, and profitability had a positive correlation.

Indian cement industry was the field of study for Ghosh (2003). He examined workingcapital management efficiency and his result showed that that there is a connectionbetween efficient employment of current assets and profitability of the companies that hereviewed. However the result indicated also that this connection varies from company tocompany.

Mathuva (2009) examined also the impact of working capital management componentson companies profitability. His sample was 30 firms listed on the Nairobi Stock

Exchange (NSE) for the periods 1993 to 2008. Mathuva (2009) results indicated thatthere exists a greatly important negative correlation between the time it takes for firms tocollect cash from their receivables and profitability. In addition his result showed thatthere is a greatly important positive correlation between the period taken to convertinventories into sales (the inventory conversion period) and profitability. Lastly, Mathuva(2009) results indicated that there is a greatly important positive correlation between thetime it takes the company to pay its payables and profitability.

Charitou, Elfani and Lois (2010) contacted a survey with a sample of 43 listed Cyprus,excluding financial institution and financial firms, for a period of 10 years, from 1998-2007 to examine the relationship between working capital management and profitability.They used as independent variables average receivables days, average conversioninventory days, average payables days and cash conversion cycle. Return on assets was


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the dependent variable used to express profitability. Debt ratio, sales growth and naturallogarithm of sales have been selected as control variables. Charitou, Elfani and Lois(2010) through their research indicated that there is an inverse correlation between thecomponents of the working capital and profitability.

Afza and Nazir (2009) examined the connection between working capital managementand companies profitability through a sample of 204 non-financial firms listed onKarachi Stock Exchange (KSE) for the period 1998-2005.Results revealed great differentbetween working capital requirements and financing policies across the variousindustries. Furthermore, an inverse connection between the profitability of companies anddegree of aggressiveness of working capital investment and financing policies was found.A conservative approach in the direction of working capital investment and workingcapital financing policies was suggested by the authors in order for the companiesincrease their value.

Vishanani and Shah (2007) examined the influence of working capital management on

the performance of Indian consumer electronic industry. Their result indicated that norecognized correlation between liquidity and profitability is been present for the industryas a whole; but various companies of the industry revealed different types of relationshipbetween liquidity and profitability. However, most of the firms showed positivecorrelation between liquidity and profitability.

Eljelly (2004) through his research concluded that efficient liquidity managementinvolves planning and controlling current assets and current liabilities in such a way thateliminates the risk of failure to meet due short-term liabilities and avoids extremeinvestment in these assets. Joint stock companies in Saudi Arabia were the field of studyfor Eljelly (2004). The correlation between profitability and liquidity was examined, asmeasured by current ratio and cash conversion cycle. The results revealed that the cashconversion cycle was of more importance as a measure of liquidity than the current ratiothat affects profitability. Trends in working capital management and its influence onfirms performance was the subject under research by Padachi (2006). The results showedthat high investments in inventories and receivables are connected with less profitability.In addition, he disclosure that inventory days and cash conversion cycle had positivecorrelation with profitability. In contrast, account receivables days and account payablesdays connected negatively with profitability.

From the above studies we have a guideline regarding working capital management andits components and its correlation with profitability. Those researches tool place on thesame subject for different countries and environment from different aspects and theyrevealed us their results and conclusions. Past studies had concluded to the same resultsroughly, which had proved there is the negative link between the working capital (cashconversion cycle, average receivables days, average payables days, average inventorydays) and profitability and the positive relationship between size of the firm withprofitability. This study attempted, based on previous studies to contribute to the researchof how working capital can affect profitability.


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3. RESEARCH METHODOLOGY

3.1 Data set and measurement of variables

The sample of the current study was selected from USA listed manufacturing companies.

The period of study covers 10 years, 2001 to 2010. Total 38 manufacturing firms wereexamined and data contains of total of 380 observations. All date were collected fromfinancial statements of the annual reports of sample companies found in the World WideWeb.

Below are the dependent and independent variables of the current study:

Dependent variables include profitability which is express as following:

Return on Assets (ROA) = Total Assets/Operating Profit

Independent variables are into two groups. First group contains working capital variableswhich are the following:

Average receivable collections period (DED) are used to express the credit policy. It canbe found by the following calculation:

Average receivable collections period (DED) = Account Receivables /Sales*365

Average conversion inventory period (SHD), which is expressed the inventory policy. Itis identified by the following calculation:

Average conversion inventory period (SHD) = Inventory /Cost of Sales*365

Average payables payment period (CPD) is used to reflect the payment policy which isidentified by the following calculation:

Average payables payment period (CPD) = Accounts Payables /Cost of Sales*365

Cash Conversion Cycle (CCY) is used to express the general working capital efficiency,which is identified by the following calculation.

Cash Conversion Cycle (CCY) = Average receivable collections period + Average

conversion inventory period - Average payables payment period

Second group are the control variables, which are the following:

Size of the company = Natural of logarithm of sales (NALOGS).

Sales Growth (SAGRR) = (Sales t-Salest-1)/Sales

Debt Ratio or Financial leverage ratio (DER) = Total Liabilities / Total Assets.


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3.2 Hypotheses of the Study

The following hypotheses are examined in the current study that depends on the variablesof study:

1. There is an inverse correlation between the components of working capitalefficiency and the profitability.

2. There is positive link between sales growth and the profitability.3. There is negative relationship between financial leverage and the profitability.

3.3 Empirical Models

Deloof, (2003), Charitou, Elfani & Lois (2010) and Lazaridis and Tryfonidis (2006)used regression analysis in order to tested their hypotheses. Based on the above studies I

regressed the cash conversion cycle and the components of the cash conversion cycle. Itested the below models:

ROAit= 0+ 1 SHDit+ 2 NALOGS it+ 3 SAGRR it+ 4 DERit + eit (1)

ROAit= 0+ 1 DEDit+ 2 NALOGS it+ 3 SAGRR it+ 4 DERit + eit (2)

ROAit= 0+ 1 CPDit+ 2 NALOGS it+ 3 SAGRR it+ 4 DERit + eit (3)

ROAit= 0+ 1 CCYit+ 2 NALOGS it+ 3 SAGRR it+ 4 DERit + eit (4)

where:

ROAit = Return on Asset counted yearly of each firm ; SHDit = Average conversioninventory period counted yearly of each firm; DEDit = Average receivable collectionsperiod counted yearly of each firm; CPDit = Average payables payment period countedyearly of each firm; CCYit = Cash Conversion Cycle counted yearly of each firm;NALOGS it = Natural Logarithm of Sales counted yearly of each firm; SAGRR it = SalesGrowth counted yearly of each firm; DERit = Debt Ratio counted yearly of each firm.

i=1,.n, where n is the total number of firms; n=38eit = estimate of yearly residual for each firm


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4. ANALYSIS OF FINDINGS

Table 1 presents the descriptive statistics of the study variables for 38 manufacturing USlisted companies (2001-2010) and for a total 380 observations. The minimum value ofReturn on Asset (ROA) -1% and the maximum is 24%, whereas the mean of ROA is

10%.

The average inventory holding period has 15 days as minimum, maximum inventoryholding period is 509 days and mean of inventory holding period days are 82.

In addition, the average receivables collection period has 3 days as minimum, maximumreceivables collection period is 107 days and mean of average receivables collection daysare 50. Furthermore, the average payables payment period has 35 days as minimum,maximum payables payment period is 346 days and mean of payables payment perioddays are 115.

The cash conversion cycle has -72 days as minimum and a maximum of 437 days. Meanof cash conversion cycle is 18 days.

The natural logarithm of size shows a minimum of 4 whilst the maximum is 5.66 in theyear. The mean of natural logarithm of sales is 5.6 . In table 1 is also indicated theminimum of debt ratio (leverage) which is 42%, whilst the maximum is 89% and themean is 60%. Sales (in million) have minimum of $10,018. Maximum of $459,579 andan average of $ 146,757.

Next I used Pearson correlation analysis examine the connection between all variables ofthe study. In Table 2 is present the Pearson correlation matrix among the variables. Thetable indicated a negative correlation between Return on Assets and average InventoryHolding period which is compatible with our hypothesis.


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In the other hand, Pearson correlation analysis shows positive relation between averageReceivables Collection Period and average Payables Payment Period. These result areopposite of my hypothesis, however the Cash Conversion Cycle has a negativerelationship with Return on Assets which is agree with the hypothesis of the currentstudy. This means that if firms want to increase their profitability, they should decrease

the duration of the Cash Conversion Cycle and as result and the components of the cycle.

Sales Growth indicates a positive correlation with return on Assets, which is agreed withmy hypothesis. In addition debt ratio (leverage) has negative correlation with Return onAssets which again is agree with my hypothesis.

where:

ROAit = Return on Asset counted yearly of each firm ; SHD it = Average conversion inventory period counted yearly ofeach firm; DEDit = Average receivable collections period counted yearly of each firm; CPDit = Average payablespayment period counted yearly of each firm; CCY it = Cash Conversion Cycle counted yearly of each firm; NALOGS it= Natural Logarithm of Sales counted yearly of each firm; SAGRR it = Sales Growth counted yearly of each firm;DERit = Debt Ratio counted yearly of each firm.

I also tested my hypothesis by using regression analysis. This analysis will find therelationship between working capital components and the profitability as expressed byReturn on Assets.

The results of the regression analysis for the correlation average inventory holding periodand the three control variables with profitability are show below in Table 3. As indicatedbelow, inventory holding period is negative related with profitability (ROA), which isagree with my hypothesis. In addition, Table 3 revealed a positive connection betweensales growth and profitability (ROA), which result that an increase in sale leads toincrease of profitability. Also debt ratio (leverage) has negative relationship withprofitability, which means that companies with high debt have problem to meet their

financial obligation. Both the relationship of sales growth and debt ratio with profitabilityagree with my hypothesis. The results are statistically important as indicated from the F-test.


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where:


Next are the results of the regression analysis for the correlation average receivables

collection period and the three control variables with profitability are show below inTable 4. As indicated below, receivables collection period is negative related withprofitability (ROA), which is agree with my hypothesis. In addition, Table 4 revealed apositive connection between sales growth and profitability (ROA), which result that anincrease in sale leads to increase of profitability. Also debt ratio (leverage) has negativerelationship with profitability, which means that companies with high debt have problemto meet their financial obligation. Both the relationship of sales growth and debt ratiowith profitability agree with my hypothesis. The results are statistically important asindicated from the F-test.

where:

ROAit = Return on Asset counted yearly of each firm ; SHD it = Average conversion inventory period counted yearly ofeach firm; DEDit = Average receivable collections period counted yearly of each firm; CPDit = Average payables

payment period counted yearly of each firm; CCY it = Cash Conversion Cycle counted yearly of each firm; NALOGS it= Natural Logarithm of Sales counted yearly of each firm; SAGRR it = Sales Growth counted yearly of each firm;DERit = Debt Ratio counted yearly of each firm.


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Following the results of the regression analysis for the correlation average payablesperiod and the three control variables with profitability are show below in Table 5. Asindicated below, payables payment period is negative related with profitability (ROA),which is agree with my hypothesis. In addition, Table 5 revealed a positive connectionbetween sales growth and profitability (ROA), which result that an increase in sale leads

to increase of profitability. Also debt ratio (leverage) has negative relationship withprofitability, which means that companies with high debt have problem to meet theirfinancial obligation. Both the relationship of sales growth and debt ratio with profitabilityagree with my hypothesis. The results are statistically important as indicated from the F-test.

where:



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Finally are the results of the regression analysis for the correlation cash conversion cycleand the three control variables with profitability are show below in Table 6. As indicatedbelow, cash conversion cycle is negative related with profitability (ROA), which isagreeing with my hypothesis. In addition, Table 6 revealed a positive connection betweensales growth and profitability (ROA), which result that an increase in sale leads to

increase of profitability. Also debt ratio (leverage) has negative relationship withprofitability, which means that companies with high debt have problem to meet theirfinancial obligation. Both the relationship of sales growth and debt ratio with profitabilityagree with my hypothesis. The results are statistically important as indicated from the F-test.

where:


The above results are in line with my hypothesis and also are in line with the result of theprevious studies, that profitability can be increase by an efficient working capitalmanagement.

5. CONCLUSION

Through the current study, I had investigated the interrelationship between theprofitability and working capital management. My field of study was 38 US listedmanufacturing companies. The results of the current project revealed that there is aninverse correlation between average receivables collection period, average inventoryholding period, average payables payment period and the profitability. It is also indicated

negative relationship between the cash conversion cycle and profitability. In addition thisstudy reveals a positive correlation between sales growth and profitability and an inverserelationship between debt ratio (leverage) and profitability.

According the results of this study and the results of the previous it is concluded thatcompanies should to manage their working capital effectively in order to increase theirprofitability.


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6. REFERENCES

1. Afza, T; Nazir, M (2008), Is it better to be aggressive or Conservative in

Managing Working Capital. Journal of Quality and Technology Management.Vol 3, No 2, pp.11-21.

2. Azhar, M; & Noriza, S (2010). Working Capital Management: The Effect ofMarket Valuation and Profitability in Malaysia. International Journal of Businessand Management. Vol. 5, No. 11, pp 140-147.

3. Brian B, (2009), Working capital policy and liquidity in the small business.Journal of small business management. Vol. 17, issue3, pp 43-51.

4. Charitou, M.S; Elfani, M; Lois, P (2010), The effect of working capital

management on firms profitability: Empirical evidence from an emergingmarket. Journal of Business & Economics Research. Vol.8 No 12, pp 63-68.

5. Christopher, S. B.; Kamalavalli, A. L (2009), Sensitivity of profitability toworking capital management in Indian corporate hospitals. Available from: . [Accessed 28 August 2011].

6. Deloof, M (2003), Working Capital Management affect profitability of BelgianFirms. Journal of Business Finance & Accounting, Vol.30 No 3 & 4, pp 573-587.

7.Eljelly, A. (2004), Liquidity

-Profitability Tradeoff: An empirical investigation inan emerging market. International Journal of Commerce & Management, Vol.14 No 2, pp 48-61.

8. Filbeck, G; Krueger, T (2005). Industry Related Differences in Working Capital Management. Mid-American Journal of Business. Vol. 20(2), pp 11-18.

9. Ganesan, V (2007), An Analysis of working capital management efficiency intelecommunication equipment industry. River Academic Journal, Vol. 3 No 2.

10.Ghosh, SK; Maji, SG (2003), Working capital management efficiency: a studyon the Indian cement industry. The Institute of Cost and Works Accountants ofIndia. Available from http://www.icwai.org/icwai/knowledgebank/fm47.pdf.

[Accessed 28 August 2011],

11.Gill, A; Biger, N; Mathur, N (2010), The relationship between working capitalmanagement and profitability: Evidence from the United States. Business andEconomics Journal. Vol. 2010:BEJ-10.


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12.Hayajneh, O.S.; Yassine, F.L.A.; (2011), The Impact of Working CapitalEfficiency on Profitability an Empirical Analysis on Jordanian ManufacturingFirms. International Research Journal of Finance and Economics. Issue 66, pp.67-76.

13.Lamberso, M (1995), Changes in Working Capital of Small Firms in Relation toChanges in Economic Activity. Mid-American Journal of Business. Vol. 10(2),pp. 45-50.

14.Lazaridis, J.; Tryfonidis, D (2006), Relationship between working capitalmanagement and profitability of listed companies in the Athens StockExchange. Journal of Financial Management and Analysis. Vol. 19 (1), pp 26-35.

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16.Padachi, K (2006), Trends in Working Capital Management and its Impact onFirms Performance. International Review of Business Research Paper. Vol. 2(2),pp 45-58.

17.Raheman. A.; Nasr, M (2007), Working Capital Management and Profitability Case of Pakistani Firms. International Review of Business Research Papers.Vol. 3 No 1, PP 279-300.

18.Shah, A; Vishnani, S (2007), Impact of Working Capital Management Policieson Corporate Performance an empirical study. Global Business Review. Vol. 8,pp. 267-281.

19.Shah, A; Sana, A (2006), Impact of Working Capital Management on theProfitability of Oil and Gas Sector of Pakistan. European Journal of ScientificResearch. Vol. 15(3), pp 301 - 307.

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21.Syed ,H; Wajahat, A (2010), Relationship between the profitability and workingcapital policy of Swedish Companies. Available from http://umu.diva-portal.org/smash/record.jsf?pid=diva2:351793. [Accessed 28 August 2011].

22.Uyar, A (2009), The Relationship of Cash Conversion Cycle with Firm Size andProfitability: An Empirical Investigation in Turkey. International ResearchJournal of Finance and Economics. Vol. 24, pp 186-193.

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