Abstract
The purpose of this study is to find the internal and external determinants of profitability of textile and cement sector of Pakistan. Secondary data is collected from “Financial Statement Analysis of companies (non-financial) listed at Karachi Stock Exchange” for the period of 2005-2010 by using the random and convenient sampling technique. Dependent variables consist of ROA and ROE and independent variables are liquidity, leverage, growth, capital intensity, size and market share. Out of the six variables, first four represents the internal factors and remaining two are external factors. Panel data analysis is applied to find the relationship among dependent and independent variables. The results of this study indicate that the liquidity and leverage impact significantly in the textile sector but growth, capital intensity, size and market share have no relevance with the profitability of this sector. In case of cement sector, liquidity, leverage and growth shows considerable effect while other factors are insignificant. This study is useful for the management of these sectors while carrying out any decision regarding internal and external variables.
Highlights
Competence of the business enterprise to create earnings through all company actions is referred to as profitability
The results showed negative relationship between profitability and both the debt and working capital factors
The Case of Textile Sector: In the textile sector 157 companies are analyzed during the period of 2005-2010 that are listed in Karachi Stock Exchange
Summary
Competence of the business enterprise to create earnings through all company actions is referred to as profitability. Term profit is used in the same meaning of profitability Though they are inter-reliant and strongly correlated but perform different functions in business. In reality these two terms are very much different. Pakistan’s economic growth is widely impacted by the textile and cement sectors. These are the major contributors of economic development and many individuals from all over the Pakistan got employment from these industries. When its total exports which is 2,263 billion is linked to the total imports that are 5,371 billion, we come to the conclusion that our trade sector requires serious measures for growth (Gallup & Gilani, 2019). Production of cement in Pakistan is decreased in June (2910 Thousands of tonnes) as compared to May of 2019 (3537 Thousands of Tonnes) (Tradingeconomics, 2019)
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