IMPACT OF

WORKING CAPITAL
MANAGEMENT ON
THE PROFITABILITY
Presented By
Anmol Rajesh Kumar
Dania Qamer
Laiba Mairaj
Maheen Ndeem
Importance of Working Capital
Management:

Studies on Working Capital and

Profitability:

Working Capital Management in

the Pakistan Cement Industry
PROBLEM STATEMENT
The cement industry in Pakistan faces significant challenges
related to profitability due to inadequate and inefficient working
capital management. The industry incurs substantial fixed and
variable costs, which includes raw materials, energy, and labour.

Cement companies in Pakistan often hold substantial inventory

to meet when ever there is a fluctuation in demand. Inadequate
control over inventory levels can tie up valuable capital and
lead to increase the costs warehousing and holding

CEMENT INDUSTRIES
PROFITABILITY
SIGNIFICANT CHALLENGES
WORKING CAPITAL MANAGEMENT
RESEARCH OBJECTIVES

01. To examine and observe the

03.
efficiency and effectiveness of
workingcapital management
practices of the selected firms
in cement industry.
To analyze the degree of
variation and differences of
ROA with respect to working
capital (inventory turnover,
accounts payable, accounts
receivables, size of the firm)

02. To test how fast the sample

04.
firms have been able to
improve their respective level
of efficiency and effectiveness
in working capital
management with respect to
the level of target (industry
average).
Evaluate and Analyze the
impact of working capital
management on profitability
of PSX listed companies for the
last five years.
Literature Review
1) The study focuses on variables such as accounts receivables, accounts payable,
inventory, and firm size, as independent variable with Return on Assets (ROA) as the
dependent variable.
2) It is clearly presented that a positive correlation exists between working capital
management and profitability of the firm. a company which maintains sufficiently low
inventory turnover levels will reduce the holding cost of the inventory turnover
because of which firm makes higher profitability (I.A Umar et al.,2023).

3) It shows that there exists a negative relationship between the profitability and the
average collection period, the lower the average collection period the higher will be
the profitability, indicating that a decrease in the number of days a firm receives
payment from sales affects the profitability of the firm in a positive manner.
(Syeda,2023).

4) There is a highly significant positive relationship between these two, the average
payment period and profitability. This implies that the longer a firm makes the
payment to its creditors, because of which the more profitable it is (Syeda,2023).

5) Delay in accounts payable turnover led to a decline in the firm's value and trust
issues with suppliers and investors, resulting in decreased profitability. The research
emphasizes the need for efficient working capital management in Pakistani firms to
enhance both profitability and overall value.(M. Shabbir et al, 2018)
Conceptual Framework
HYPOTHESIS H1: There is a significant relationship between
Number of days Inventories (INV) and Return on
Assets (ROA) of the firms.

H2: There is a significant relationship between

Number of days Accounts Receivable (AR) and
Return on Assets (ROA) of the firms.

H3: There is a significant relationship between

Number of days Accounts Payable (AP) and Return
on Assets (ROA) of the firms.

H4: There is a significant relationship between Size

of the Firm and Return on Assets (ROA) of the
firms.
POPULATION AND STUDY SAMPLE
About the Realtor

The population in Pakistan cement

sector is thirty-five companies. From
which five companies are selected
from the year (2018-2023).

1: Fauji Cement Company

2. Attock Cement Company.
3. Kohat Cement Company.
4. Lucky Cement Company.
5 Pioneer Cement Company.
Data Collection Sampling Method

Five cement businesses were chosen

This research adopts a quantitative,
using a systematic selection technique
deductive approach, employing a
out of 35 companies and the data was
nonprobability Convenience sampling
then analyzed to confirm our theory.
method with a focus on five cement
Data was gathered from the resources
companies listed on the Pakistan Stock
listed below.
Exchange. Secondary data from financial
1. Annual reports of the companies
statements and the PSX were utilized for
2. PSX official website
analysis.
3. SECP official website
 METHOD OF ANALYSIS

Quantitative analysis of the study's data collection Statistics was used to the
data which was gathered from various sources. This analysis was useful in
determining the accuracy of the estimation. Statistical tests are the following:
F-test. T-test. Regression, Coefficients. These statistical tests were applied in
SPSS software.
 REFERENCES
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THANK YOU