Revisiting the enigma of working capital, profitability and risk: evidence from pakistan

This study investigates the relationship between working capital management and firm profitability. We incorporate moderating effect of systematic and unsystematic risk to ascertain the impact of risk on working capital decisions. The study uses secondary data of 244 listed non-financial firms over 10 years from 2009 to 2018. The findings reveal that inventory turnover, receivable collection period and cash conversion cycle negatively influence firm performance. However, accounts payable period has significant and positive effect on firm performance. Systematic risk negatively moderates the relationship between accounts payable period and return on assets and positively moderates relationship among accounts collection period, cash conversion cycle and return on assets. Unsystematic risk has insignificant effect on the relationship between working capital and profitability.