Today¿s unpredictable economic conditions pose great challenges for firms that intend to: grow, make increased profits, have healthier financial condition, and to reduce any possible risks. Funds in working capital may be utilized to address these concerns. The present research study makes an endeavor to examine relationship between working capital management policies and profitability. According to results, industrial sectors are following, significantly, different approaches to manage their working capital. All sectors illustrated that a conservative working capital investment policy generate positive returns except for one sector. Moreover, adopting an aggressive financing policy leads to higher earnings in four sectors and three sectors depicted opposite results. Present study may contribute towards the existing finance literature and current study may help the financial managers and policy makers to enhance their return on assets and equity by managing a suitable working capital investment and financing policy.

Muhammad Waqas Younas, M. Com (18 years): Studied Corporate Finance at Hailey College of Commerce, University of the Punjab. His areas of interest are Corporate Finance, Risk & Investment Management and Economics. He is research scholar at Hailey college of Commerce, Lahore.