Impact of working capital on firm performance in pharmaceutical organizations (2004-2008)

Abstract

This study is based on the impact of working capital management on firm’s profitability. Usually, a company is always aims to have the greater risk in order to gain maximum profit, so that’s why firm reduces the investment of its working capital in proportion to the firm’s sales. In opposite to if a firm’s wants to increase its liquidity position then, it will increase the investment in working capital to gain the maximum liquidity position. Though, the policies to invest in working capital more will Leads the firms to decreases its sales volume as a result reduction in profitability as well. That's why; a firm has to maintain a balance between liquidity and profitability. In this research an endeavor has been made to check the impact of working capital management policies towards the profitability of Pakistan Pharmaceutical Industry for the period (2004 to 2008).The impact of working capital management on firm’s profitability will examine by using statistical tools like one to one correlation and regression model to check the association and cause effect relationship between working capital and profitability by using ratio of both variables as secondary data.