Impact of Working Capital Management On Profitability of Companies Evidence from Food Sector Firms of Pakistan

Abstract

This study uses 99 firm-level observations to examine how working capital management affects corporate performance. The descriptive analysis reveals that there is a considerable variation in profitability amongst firms, with Return on Assets (ROA) averaging 6.55 with a standard deviation of 9.98, ranging from –22.09 to 27.49. Due to variations in how businesses collect receivables and settle supplier obligations, the Average Payment Period (APP) is 49.07 days and the Average Collection Period (ACP) is 21.14 days. With an average of 87.55, inventory (INV) records show a variety of inventory management techniques. When combined, these metrics imply that effective management of inventory, payables, and receivables improves liquidity and boosts profitability. Businesses that keep these working capital components in the best possible balance experience reduced financial risk and increased operational effectiveness. On the other hand.