Working Capital Policy:

Working capital policy of firm refers to the investment level of firm in its current assets to
achieve its desired target. A lot of Research Specialists have studied the working Capital policy
from different views and in different kind of environment. For instance, in a study it is said that,
Managing a working Capital Policy has a very significant impact on the financial performance
of firms. Working captial is consider as internal funding resource of the firm that provides
Liquidity to firms to funds, its short term obligations. Aktas et al., (2015); Deloof, (2005);
Yazdanfar & Ohman, (2014). Moreover one studies show that holding more working capital
could result in a high cost of liquidity while holding low working capital could have a high cost
of illiquidity. (Panda & Nanda, 2018). In the Pakistani context, Afza and Nazir, (2007) found a
negative relationship between the profitability measures of the firms and the degree of
aggressiveness on working capital investment and financing policies for 204 public limited
companies that were listed at Karachi stock Exchange for the period 1998-2005. As the results of
Study indicate that the firm with more aggressive working capital policy may not be able to
generate more profit proving the negative relation of Working capital policy and profitability of
the firm.