RESEARCH OBJECTIVE:

• To examine and observe the efficiency and effectiveness of working capital management
practices of the selected firms in cement industry.
• To test how fast the sample firms have been able to improve their respective level of efficiency and
effectiveness in working capital management with respect to the level of target (industry average).
• To analyze the degree of variation and differences of ROA with respect to working capital (inventory
turnover, accounts payable, accounts receivables, size of the firm)
• Evaluate and Analyze the impact of working capital management on profitability of PSX listed
companies for the last five years.

Literature Review:
1) The study focuses on variables such as accounts receivables, accounts payable, inventory, and firm
size, as independent variable with Return on Assets (ROA) as the dependent variable.
2) It is clearly presented that a positive correlation exists between working capital management and
profitability of the firm. a company which maintains sufficiently low inventory turnover levels will
reduce the holding cost of the inventory turnover because of which firm makes higher profitability
(I.A Umar et al.,2023).

3) It shows that there exists a negative relationship between the profitability and the average
collection period, the lower the average collection period the higher will be the profitability,
indicating that a decrease in the number of days a firm receives payment from sales affects the
profitability of the firm in a positive manner. (Syeda,2023).

4) There is a highly significant positive relationship between these two, the average payment period
and profitability. This implies that the longer a firm makes the payment to its creditors, because of
which the more profitable it is (Syeda,2023).

5) Delay in accounts payable turnover led to a decline in the firm's value and trust issues with
suppliers and investors, resulting in decreased profitability. The research emphasizes the need for
efficient working capital management in Pakistani firms to enhance both profitability and overall
value.(M. Shabbir et al, 2018)

Conceptual Framework:

1) Effective Working Capital Management is crucial for a firm's financial health, aiming to balance
current assets and liabilities to avoid disruptions, fiscal crises, or bankruptcy, ultimately impacting
profitability.
2) A positive relationship exists between inventory and ROA, emphasizing the significance of
managing the period of inventory sales and technical production to enhance profitability.
3) A negative relationship is observed between Account Receivable and ROA, indicating that a
shorter receivables collection period positively influences a company's profitability.
4) A highly significant positive relationship is found between the average payback period (APP) and
profitability, suggesting that a longer period taken by the company to pay its creditors contributes to
increased profitability.

HYPOTHESES:
H1: There is a significant relationship between Number of days Inventories (INV) and Return on
Assets (ROA) of the firms.
H2: There is a significant relationship between Number of days Accounts Receivable (AR) and
Return on Assets (ROA) of the firms.
H3: There is a significant relationship between Number of days Accounts Payable (AP) and Return on
Assets (ROA) of the firms.
H4: There is a significant relationship between Size of the Firm and Return on Assets (ROA) of the
firms.
POPULATION AND STUDY SAMPLE:
The population in Pakistan cement sector is thirty-five companies. From which five companies are
selected from the year (2018-2023).
1: Fauji Cement Company
2. Attock Cement Company.
3. Kohat Cement Company.
4. Lucky Cement Company.
5 Pioneer Cement Company.
Data Collection:
Five cement businesses were chosen using a systematic selection technique out of 35 companies and
the data was then analyzed to confirm our theory. Data was gathered from the resources listed below.
1. Annual reports of the companies
2. PSX official website
3. SECP official website
Sampling Method:
This research adopts a quantitative, deductive approach, employing a nonprobability Convenience
sampling method with a focus on ten cement companies listed on the Pakistan Stock Exchange.
Secondary data from financial statements and the PSX were utilized for analysis.
Method of Analysis:
Quantitative analysis of the study's data collection Statistics was used to the data which was gathered
from various sources. This analysis was useful in determining the accuracy of the estimation.
Statistical tests are the following: F-test. T-test. Regression, Coefficients. These statistical tests were
applied in SPSS software.