Business, Management and Accounting
4 years ago

Optimizing working capital boosts profits for manufacturing firms in Pakistan.

Journal of Financial Risk Management
Working Capital Management and Firms’ Profitability: Dynamic Panel Data Analysis of Manufactured Firms
Kafeel Kafeel, Javed Ali, Maaz Ud Din, Abdul Waris, Muhammad Tahir, Sher Khan

Paper Summary

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The study looked at how managing a company's working capital affects its profitability. They used different models to analyze data from manufacturing firms in Pakistan from 2007 to 2018. The results showed that keeping inventory for a longer time and delaying payments to suppliers can increase profits. However, taking longer to collect payments from customers can have a negative impact. The study suggests that companies can improve profitability by managing their cash flow more efficiently and reducing inventory and accounts receivable.