This website uses cookies to ensure you have the best experience. Learn more

Working Capital Efficiency: A Comparison Of Pakistani Cement And Textile Industry

2129 words - 9 pages

Abstract

The objective of this paper is to compare working capital efficiency of Cement and Textile Industry of Pakistan for the period of 2001-2008. Working capital efficiency is measured by using three index values i.e. performance index (PI), utilization index (UI) and efficiency index (EI). In second part EBIT is associated with working capital variables i.e. account receivable in days (AR), account payable in days (AP), inventory in days (Inv) and current ratio. Size of business (Natural log of sales) and gearing are used as control variables. This study is based on secondary data and the number of observations is 400. Data sources are State Bank of Pakistan and Annual Reports of firms. Data analysis methods consist of regression analysis and index numbers. Major finding of the study is the working capital mangement of cement industry is better than textile industry. There is vast variation in managing working capital efficiency of the firms. The regression analysis shows that there is a positive relationship between current ratio and EBIT. EBIT has shown significant negative relationship with account payable in days and account receivable in days while significantly negative relationship with inventory in days. EBIT has shown significant positive relationship with the size of firm but insignificant negative relationship with gearing. Where as EAT has shown significant negative relationship. The cement industry is earning more EBIT by strict control of credit to customers, making early payments to account payable and decreasing their inventory in days. Larger firms with less gearing are also earning more profit.

I. Introduction

Main focus of finance books is on the study of long term financial decisions. Working capital management was unable to gain due attention. Current assets and liabilities are important components of total assets and they should also be managed efficiently. Management of working capital needs more attention because it can play key role for the profitability of firms (smith, 1980).

Working capital means funds necessary for the working of a business. It is calculated by deducting current liabilities from current assets. Current assets are those assets which can be converted in to cash within short period of time without undergoing diminishing in the value and without disruption of business. Current liabilities are obligations of business which are payable in short period of time. Every business has to make arrangements for sufficient working capital for day to day expenditure (Ramachandran et al., 2009).

Working capital management is very important component of corporate finance because it directly affects the liquidity and profitability of the company. It deals with current assets and current liabilities. Working capital management is important due to many reasons. Excessive levels of current assets can easily result in a firm’s realizing a substandard return on investment. However firms with too...

Find Another Essay On Working Capital Efficiency: A Comparison of Pakistani Cement and Textile Industry

Productive Efficiency and In Efficiency of a Production Possibility Frontier

1408 words - 6 pages Productive Efficiency and In Efficiency of a Production Possibility Frontier (PPF) Introduction The production possibility frontier is also known as the (PPF) in the economics world. It is simply a graph or diagram that does clearly show the production rate of two goods and/or services that an economy does produce efficiently or inefficiently over a given period of time. It accurately shows the production levels of the maximum to the minimum

Overview of Textile Industry in pakistan

1947 words - 8 pages is made from the supplemented artificial fiber. When we see the system of textile it composes of that process of production of yarn and cloth than comes the design industry and fashion trend or fads and the last steps is their distribution. This is in ignorable fact that in Pakistan our textile sector is deemed to impact as a main player or pillar for improving Pakistani economy. Another vital fact is that this sector is fortunate to have many

Total Quality Management: 5S of House Keeping Application with a Focus on Textile Industry

9582 words - 38 pages AbstractThis research addresses the application of 5S of Housekeeping concepts to the continuous production/ process sector with a focus on the Textile industry. The goal of this research is to investigate how 5S of Housekeeping approach / method can be adapted in the Textile manufacturing environment, and to evaluate their benefits on a specific application instance. Although the processes of Textile industry have share several common

Working Capital and Financial Environment

1143 words - 5 pages able to succeed in the Global Business Market, which makes 70% of the profits for the Business. This large percentage of income has resulted form Coca Cola's use of sales and assets across international borders and resulting form flow of capital, goods, services and labor.Coca Cola does not outsource their distribution even though Coca Cola is a very large company. The company has chosen to deal directly with the retail and foodservice industry

A Comparison of Theories of Social Capital by Pierre Bourdieu and James Coleman

3540 words - 14 pages A Comparison of Theories of Social Capital by Pierre Bourdieu and James Coleman Social capital is a sociological theory which has gained increasing attention in recent years. Whilst Bourdieu can be credited with introducing the term to sociology, it was James Coleman who allowed the concept to gain widespread recognition, highlighting its importance as an individual notion. For Bourdieu social capital forms a part of

Trade Restrictions and Hong Kong's Textile and Clothing Industry

3324 words - 13 pages instability (AccountAbilility - Institute of Social and Ethical Ac-countability, 2005).The decline in working conditions can be considered as an impact on the workforce itself. This can be seen as a consequence of an increasing pressure on companies to reduce costs. In the worst case, the workers lose the ability to exercise and defend their rights. Furthermore it is feared that an increasing price competition in the textile and clothes industry

Human Resource Management and the importance of top and HR managers working together to achieve organizational efficiency

2239 words - 9 pages . One example is the "hard" approach of management towards hospital professionals. Belinda Moyes, principal nursing adviser to the Victorian State Government was quoted as saying that "management is too focused on efficiency and throughput, at times to the detriment of the people working there. Workers in hospitals need to be rewarded with a better working life and are not going to put up with being treated badly." (Owen, 2001). It is obvious that

The Impact of NAFTA on the U.S. Textile Industry

880 words - 4 pages United States, particularly in industries such as textiles. A glance at the data four years after the passage of NAFTA suggests the critics had a point. Between 1994 and mid-1997, about 149,000 US apparel workers lost their jobs, over 15 percent of all employment in the industry. Much of this job loss has occurred because producers have moved production to Mexico. Between 1994 and 1997, Mexico's apparel exports to the United States trebled to

Working Capital: The Life Blood of Business

1123 words - 5 pages income, long-term loans, sale of capital assets and fund contributed by investors, but many business owners use their personal financial resources to fund their businesses. Working capital also gives confidence on a business. Having sufficient of it makes it easy to attract investors or get business loans. Working capital is really important in business because it helps the business to continue its operations. However, it is not only important to

Effectiveness and Efficiency of HR

568 words - 2 pages capability of his people. What started, as a much-despised activity of managing the relationship between businesses and labor unions has now become an essential part of any successful organization. In my opinion assessing and measuring the effectiveness and efficiency of HR programs is truly an important challenge for HR professionalsHistory:The history of Human Resource Management (HRM) can be traced back to the early 1900s. Galbraith and

"A Comparison of the Representations of the British Working Classes in the Cinema of the 1960's and the 1990's" This essay examines and compares the lives of the working classes in British film

3989 words - 16 pages "A Comparison of the Representation of the British Working Classes in the Cinema of the 1960's and the 1990's"Throughout the history of British cinema the working class have been portrayed in many different cinematic styles. In the 1930's films like "Night Mail" showed the every day activities of the working class in the style now known as the British documentary movement. Then in 1959 the New Wave movement began with the film "Room at the Top

Similar Essays

Import Competition And Efficiency In Indonesia’s Textile And Apparel Industry: A Threshold Autoregressive Model

1831 words - 7 pages annual mean scores have a tendency to stable eventually, excluding annual mean score of technical efficiency for textile industry which tend to decrease. 4B. TAR model results The TAR model points out the thresholds which separate two regimes in the relation between import competition and technical efficiency and between import competition and scale efficiency for the two industries. The TAR model shows that the thresholds in the relation

Comparison Of Pakistani And Chinese Social Entrepreneur

1377 words - 6 pages Entrepreneurship&SME ManagementAssignmentComparison of Pakistani and Chinese Social EntrepreneurXie LihuaXie Lihau is one of the social entrepreneurs in China. She has been known for her tremendous efforts in the field of Community Development particularly in safeguarding the rights of women and giving them a status in society which women truly deserve. Education and gender awareness among rural women are her primary aims.She describes her

Weaknesses, Threats And Issues Of Pakistan Textile Industry

3348 words - 13 pages proves to be a significant burden on the economy. Also most of the machineries which have been previously imported have become obsolete or in the process of becoming obsolete and there is a continuous need for upgradation.•Unskilled workers still used in the capital intensive part of the industry which leads to greater efficiency and lower productivity. Designing and training institutes have been established by the government and textile

Japan Economy And Textile Industry Essay

1849 words - 7 pages sector, including manufacturing, wholesale and retail, creates 1.83 million jobs.High localization is a characteristic of this industry. About 160 textiles and clothing production areas exist in Japan.While the textile and clothing industry sustains the development of local economies by creating employment, it is easily affected by economic fluctuations because of the characteristics of SMEs, including the small number of employees per