Assessment of Working Capital Finance

Topics: Finance, Financial ratio, Financial ratios Pages: 18 (2669 words) Published: September 28, 2013
World Applied Sciences Journal 12 (11): 1967-1973, 2011
ISSN 1818-4952
© IDOSI Publications, 2011

Practices of Working Capital Policy and Performance Assessment Financial Ratios and Their Relationship with Organization Performance


Ghulam Shabbir Khan Niazi, 2Ahmed Imran Hunjra, 3Majid Rashid, 4
Syed Waqar Akbar and 5Muhammad Naeem Akhtar

Quaid-I-Azam, School of Management Sciences, Quaid-I-Azam University Islamabad, Pakistan 2
Scholar Iqra University Islamabad, Pakistan
Allama Iqbal Open University, Islamabad, Pakistan
Quaid-e-Azam University Islamabad, Pakistan
Iqra University, Islamabad, Pakistan

Abstract: The purpose this study is to highlight the application of working capital policy and the performance assessment financial ratios and to determine their relationship with organization performance. The target respondents were the finance executives/financial analysts of the companies. 64 properly filled questionnaires were processed for analysis. This study concludes that the finance executives consider that the proper practices of working capital and financial ratios are very important for the growth and performance of the organization. This research study also finds that there is positive and significant relationship between these practices and organization performance.

Key words:Working capital policy
Financial ratios
Significant Relationship
The corporate culture depends on attitudes, beliefs
and company management's values, education and work
experience and its impact on corporate decision making
processes. When the executives were rewarded (or
punished) for their work, it’s not written in company
policy, but referred to be an important corporate culture's
components. The IMF report provides strong evidence
regarding the crises that took place in 1997, was an out
come of poor corporate sector [1]. Working capital policy
relates to the management of short term assets and
liabilities within the maturity period of one year. Working
capital management is really vital for the financial health
of business no matter what is the size of the business. For
the growth and survival of firms efficient working capital
is indeed a requirement because it shows the level of
inventory, production and sales [2]. Probably, financial
managers spare more time for working capital management
than any other financial activity. The debate on working
capital policy is having different views in a way that

Corporate sector

Organization performance

financial distress leading to bankruptcy is believed to be
a result of poor short-term asset and liability management.
The financial performance assessment is viewed as an
important factor in evaluating company performance.
The results of efficient working capital and financial
ratios can be useful in analyzing the efficiency of a
company in different operations. If these practices such
as working capital policy and performance assessment
financial ratios are exercised an organization would
achieve a better resource utilization and profit margin.
Pakistani corporate sector has grown over the period of
time through the courtesy of privatization and
liberalization, yet practice of these functions should be
implemented in Pakistani corporate sector. Working
capital policy and financial performance assessment ratios
are very important for the organizational success and
growth and hence must be practiced in Pakistani
corporate sector at large. The proper exercise of working
capital policy and financial ratios are very important for
every organization and has a significant impact on
company performance and growth. In Pakistan, many

Corresponding Author: Ahmad Imran Hunjra, Scholar Iqra University, C/o Hafiz Shoiab, Audit department, Iqra University, Islamabad, Plot#5, H-9 Sector, Islamabad (44000), Pakistan. Cell: +92-0345-7162527, E-mail:


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