Determinants of Working Capital Requirements

Working capital is a financial measure that interprets operating liquidity available to a business, organization or other entity and is counted a part of operating capital. The importance of working capital management is irrefutable. Moreover, the recognition of determinants of working capital is crucial as to take proper measures regarding the management of each component of working capital. The main reason behind the failure of many businesses is the incapability of firm’s financial managers to properly managing their current assets and liabilities (Smith, 1973). The present study will see that what are the major factors those determine the Working Capital Requirements of Pakistani firms. The sample of 385 selected from 414 listed non-financial firms in Karachi Stock Exchange, Pakistan. The period covered by the study extended to six year starting from 2004 to 2009 (2310 firm-year observations).