Working capital management and profitability in Pakistan’s automobile industry: An analysis

Main Article Content

Nabeela Arshad
Saqib Rehman
Shabbir Hussain
Adeel Nasir


The study investigates the relationship between working capital management and profitability of explicit firms that are allied with the automobile sector of Pakistan. Profitability is measured by two of its proxy variables i.e. Return On Assets (ROA) and Return On Equity (ROE) while the independence of the study is examined through the mediums of Inventory Turnover Ratio (ITOR), Account Payable Turnover Ratio (APTOR), Account Receivable Turnover Ratio (ARTOR) and Operating Profit (O.P). The study occupies three liquidity ratios as well; consolidated as control variables, include Current Ratio (CR), Quick Ratio (QR) and Solvency Ratio (SR) played as a catalyst and do not impact the genuine findings. The study targets the firms in the automobile sector which are listed on the Pakistan Stock Exchange (PSX) and also being actively traded there. Thus, the study aims to highlight the impact of efficient working capital on profitability. The study also elaborates on the actual potential, demand and operational mechanism of automotive firms while assembling. Second, the study visualizes the opportunistic and enlisted current demand bidden by the resident customers to the automotive sector of Pakistan. The annual financial reports of automotive firms have been gathered for five years from (2016 - 2020). The comprised model has been tested through the multiple regression analysis via Statistical Package for the Social Sciences (SPSS). The findings of the study ascribed that Account Receivable Turnover Ratio (ARTOR), Inventory Turnover Ratio (ITOR) and Operating Profit (O.P) are statistically significant and positively related to Return on Assets (ROA) and Return on Equity (ROE) while Account Payable Turnover Ratio (APTOR) is statistically insignificant and inversely linked to Return On Assets (ROA) and Return On Equity (ROE). The outcomes of the study have set a roadmap to uplift this sector to meet its true potential demanded by the local consumers.

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How to Cite
Arshad, N. ., Rehman, S., Hussain, S. ., & Nasir, A. (2022). Working capital management and profitability in Pakistan’s automobile industry: An analysis. Journal of Public Value and Administrative Insight, 5(2), 292–305.


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