IMPACT OF WORKING CAPITAL MANAGEMENT ON FIRMS' PROFITABILITY: EVIDENCE FROM PAKISTAN'S OIL AND GAS EXPLORATION SECTOR

Abstract

Working capital management plays a key role in determining how financially healthy and efficient a company is, especially in high-cost industries like oil and gas exploration. In Pakistan, this sector is extremely important for the country's energy supply and economic growth, yet it faces serious challenges such as high operational costs, long project timelines, unstable global oil prices, and significant financial risks. Despite its importance, very little research has explored how working capital management actually affects the profits of oil and gas companies in Pakistan, and this study aims to fill that gap. The study looks at key elements of working capital management including the cash conversion cycle, the time taken to collect payments from customers, how long inventory is held, and how long it takes to pay suppliers, and compares these against profitability measures like return on assets and return on equity. Data is taken from publicly listed oil and gas exploration companies in Pakistan and analyzed using statistical methods, while also accounting for factors like company size, debt levels, and growth opportunities. The findings are expected to be highly useful for company managers, investors, and government policymakers, helping them understand the best working capital practices that can boost profits without causing cash flow problems. Overall, this study highlights why smart and careful financial management matters deeply in capital intensive industries and provides a strong foundation for future research across Pakistan's energy sector and other emerging markets.