This study examines and compares the impact of working capital components like average
collection period (ACP), inventory conversion period (ICP), average payment period (APP)
and cash conversion cycle (CCC) on profitability indicator return on asset (ROA) for KSE
listed manufacturing companies in two different periods. For this purpose years from
2004-2006 and years from 2008-2009 covers period before and during financial crisis
respectively. Forty KSE registered manufacturing firms were taken as a research sample.
Multiple linear regression and correlation techniques were used to check the influence of
WC components on return on asset. It was concluded that average collection period in both
period has negative impact on firms performance. Cash conversion cycle has positive
impact before and negative impact during crisis period on company profitability. Similarly,
inventory conversion period has negative impact before crisis and positive impact during
crisis period. However, there is insignificant relationship between average payment period
and return on asset of a company. Hence it is suggested for managers to keep average
collection period, inventory conversion period up to minimum level and cash conversion
cycle up to maximum level before crisis period. However, by keeping average collection
period and cash conversion cycle up to minimum level and inventory conversion period up
to maximum level during crisis period will enhance firms profitability
Key words: Working capital management, Return on assets, Average collection period, Inventory conversion period, Average payment period, Cash conversion cycle
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