Does Efficient Working Capital Management Enhance Profitability of Pakistani Firms?

The current paper aspires to explore further the impact of working capital management on profitability by considering recent statistics. For the stated purpose, a sample of 100 nonfinancial firms listed on Karachi Stock Exchange (KSE) for the period of 2005-2009 is considered. Inventory turnover in days (ITID), Average Collection period (ACP) and Average Payment period (APP) are used as components of working capital. Having used net profit after tax as a measure of profitability, study results show that managers can enhance profits of the firms by mounting ITID and APP to an optimal level. The improved ITID increases sales of the firm while distended APP makes available the opportunity of short term investment.