THE EFFECT OF WORKING CAPITAL

MANAGEMENT ON PROFITABILITY OF
PHARMACEUTICAL SECTOR OF PAKISTAN

By:ZAKIR ULLAH
Roll No: 8451
Supervisor: SIR IRFAN ULLAH
Department of Management Sciences
Abasyn University Peshawar
Presentation in Outline
Introduction to the Study
Literature Review
Methodology of the Study
Findings of the Study
Conclusion
Introduction of the Study
• Background of the Study:
• The concept of Working capital management
• Relationship with Profitability
Introduction of the Study (Cont.….)
• Problem Statement:
This research investigates the effect of WCM on profitability
Pharmaceutical sector of Pakistan
• Research Question:
• Does the working capital management affect the
profitability of the pharmaceutical industry in Pakistan?
• Research Objective:
The focus of this study is effect of WCM on profitability
Pharmaceutical sector in Pakistan.,
To find the effects of different working capital
management’s components on the profitability of the
pharmaceutical industry
Literature Review
Important Theories
1. The Concept of WCM
2. Theories of Profitability
Methodology of the Study
• Research Approach:
The Quantitative study approach has been used in this
Study as it’s nature is a Case Study.
• Nature of Investigation:
Techniques used for data analysis in the research
are descriptive statistics and multiple regression analysis.
Methodology of the Study (Cont.…)
• Population and Sample of the Study:
• The population of this study is Pharmaceutical sector
in which 6 pharmaceutical companies has taken as
a sample by using simple random sampling
technique.
Methodology of the Study (Cont.…)
• Data Collection and Analysis Methods
o Secondary data has been used in this Study
o The Internet Sources provided full set of financial data for
the period 2014-2018
Findings of the Study
• Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

GOI 30 .07 2.27 .9926 .67453

CR 30 .00 5.83 2.3072 1.37499

QR 30 .43 4.77 1.6543 1.16596

DR 30 .03 .98 .4086 .25154

WCT 30 -5.99 7.95 2.3137 3.25940

Findings of the Study (Cont.….)
Interpretation
• The mean value of gross operating income is .9926 and standard
deviation is .67453. Its mean that the value of profitability can deviate
from its mean to both side by .67453. Maximum value of gross
operating income is 2.27 while minimum is .07.
• The current ratio has a mean value of 2.3072 and standard deviation
of 1.37499. While its maximum value is 5.83 and minimum is .00
• The quick ratio has a mean value of 1.6543 and standard deviation of
1.16596. While its maximum value is 4.77 and minimum is .43
• The debt ratio has a mean value of .4086 and standard deviation of
.25154.While its maximum value is .98 and minimum is .03
• The working capital turnover has a mean value of 2.3137 and
standard deviation of 3.25940.While its maximum value is 7.95 and
minimum is -5.99.
Findings of the Study (Cont.….)
•

Model Summary

Model R R Square Adjusted R Square Std. Error of the

Estimate

1 .455a .207 .080 .64686

a. Predictors: (Constant), WCT, QR, CR, DR

Findings of the Study (Cont.….)
• Interpretation
• In this regression analysis table the dependent variable is
Gross operating income and the independent variable is
current ratio, quick ratio, debt ratio and working capital
turnover.
• The model has adjusted R-squared of 0.207 that means
approximately 20% of the variance in the dependent
variable GOI was accounted for by the model and 80% of
the variance remained unexplained.
Findings of the Study (Cont.….)

Model Unstandardized Coefficients Standardized t Sig.

Coefficients

B Std. Error Beta

(Constant) -1.075 .835 -1.287 .210

CR .304 .175 .619 1.731 .096

1 QR .059 .168 .103 .355 .726

DR 2.645 1.053 .986 2.512 .019

WCT .081 .055 .392 1.472 .153

a. Dependent Variable: GOI

Findings of the Study (Cont.….)
• Interpretation

Based upon the results, most of the independent variable

are insignificant, as it can be seen that their significance is
greater than 0.05. However the debt ratio is significant, its
level 0.019 is less than 0.05.
Findings of the Study (Cont.….)
Table 3

ANOVAa

Model Sum of Squares Df Mean Square F Sig.

Regression 2.734 4 .683 1.633 .197b

1 Residual 10.461 25 .418

Total 13.195 29

a. Dependent Variable: GOI

b. Predictors: (Constant), WCT, QR, CR, DR

Findings of the Study (Cont.….)
• Interpretation
• Dependent Variable: ROA

• Table 4 shows the regression that overall the model is

insignificant. The value of F-statistics is 1.633 having a P-
value of .197 which is greater than 5% (0.05) level of
significance.so it not signifies the results for the effect of
working capital management on firm profitability.
Conclusion
• In financial management, you can about capital management
studies are not as popular as those related to capital structure and
capital budgeting. In this perspective, this study aims to analyze
the determinants of firm profitability of variables associated with
the management of working capital with a sample of steam for
pharmaceutical companies the period 2014-2018. For this purpose
regression model was applied. The research study taken had
results, and it is thereby concluded that the way in which working
capital is managed it does have an insignificant effect on the
profitability on the pharmaceutical firms.
• I have found that there is a significant positive relationship
between gross operating income and debt ratio. While there exists
a negative relationship of gross operating income with the current
ratio, quick ratio and working capital turnover ratio.
• The results suggest that managers can create and increase their
firm’s value by managing the working capital effectively, by
maintaining steady cash balances in order to meet short term
obligations, and also try to keep their debt level low with regards to
their level of assets. Their sales should be excess than the current
assets and current liabilities.