EFFECT OF WORKING CAPITAL ON PROFITABILITY MANAGEMENT; A CASE OF FERTILIZER SECTOR OF PAKISTAN

Abstract

This research paper main objective is to determine and evaluate the relationship of the fertilizer producing companies’ profitability and the working capital elements. Data was extracted from financial statement of the fertilizer manufacturing companies from the year 2014 to 2019 and Pakistan Stock Exchange website .ROA (Return on assets) and ROE (Return on equity) were used as the proxies for profitability and ACP (Average collection period), APP (Average payment period) and CCC (Cash conversion) were chosen as the proxies of working capital. The study finds that there exist a relationship among working capital and firm performance but analysis also shows that relationship exist but relationship is not strong among chosen working capital elements (CCC, APP, ACP) and profitability. So there are other variables that directly affect profitability of the firms in Pakistani fertilizer producing sector also fertilizer manufacturing firms in Pakistan are not efficiently utilizing different components of working capital to enhance the profitability of their companies.