A Study on Working Capital Practices Across Manufacturing Sector of Pakistan
Journal of Managerial Sciences Volume XI Number 03 (2017)
20 Pages Posted: 24 Aug 2018
Date Written: 2017
The study examines the facts of working capital management practices adopted by Pakistani firms listed on Pakistan Stock Exchange (PSX). We collected data from 126 financial managers by using a questionnaire. We also make the discussion with financial analysts to know the components of working capital practices i.e. cash management, account receivable management, payable management, and inventory management. We found evidence that mostly firms follow hedge approach in financing and which involves a tradeoff between liquidity and profitability. Respondents consider account receivable management is backbone of efficient Working Capital. Moreover, we conclude that mostly firms rely on cash conversion cycle being a financial measure of WCM. Further, Pakistani firms tend to use centralized cash management and not follow any statistical tool or measure to control over inventory. Policy and decision makers and finance managers should pay more attention towards managing components of working capital and use statistical tool or software to check and evaluate their performance.
Keywords: Working Capital Practices; Cash Management; Receivable Management; Payable Management; Inventory Management; Survey Analysis
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