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Working Capital Policy:
Working capital policy of firm refers to the investment level of firm in its current assets to achieve
its desired target. A lot of Research Specialists have studied the working Capital policy from
different views and in different kind of environment. For instance, in a study it is said that,
Managing a working Capital Policy has a very significant impact on the financial performance of
firms. Working captial is consider as internal funding resource of the firm that provides Liquidity
to firms to funds, its short term obligations. Aktas et al., (2015); Deloof, (2005); Yazdanfar &
Ohman, (2014). Moreover one studies show that holding more working capital could result in a
high cost of liquidity while holding low working capital could have a high cost of illiquidity.
(Panda & Nanda, 2018). In the Pakistani context, Afza and Nazir, (2007) found a negative
relationship between the profitability measures of the firms and the degree of aggressiveness on
working capital investment and financing policies for 204 public limited companies that were
listed at Karachi stock Exchange for the period 1998-2005. As the results of Study indicate that
the firm with more aggressive working capital policy may not be able to generate more profit
proving the negative relation of Working capital policy and profitability of the firm.

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Litrature Review of Project 1-2.docx

  • 1. Working Capital Policy: Working capital policy of firm refers to the investment level of firm in its current assets to achieve its desired target. A lot of Research Specialists have studied the working Capital policy from different views and in different kind of environment. For instance, in a study it is said that, Managing a working Capital Policy has a very significant impact on the financial performance of firms. Working captial is consider as internal funding resource of the firm that provides Liquidity to firms to funds, its short term obligations. Aktas et al., (2015); Deloof, (2005); Yazdanfar & Ohman, (2014). Moreover one studies show that holding more working capital could result in a high cost of liquidity while holding low working capital could have a high cost of illiquidity. (Panda & Nanda, 2018). In the Pakistani context, Afza and Nazir, (2007) found a negative relationship between the profitability measures of the firms and the degree of aggressiveness on working capital investment and financing policies for 204 public limited companies that were listed at Karachi stock Exchange for the period 1998-2005. As the results of Study indicate that the firm with more aggressive working capital policy may not be able to generate more profit proving the negative relation of Working capital policy and profitability of the firm.