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Institute of Business Management

College of Business Management

Corporate Finance
Fall 2010 Semester

Guidelines for Term Research Project (30 marks out of 100)

Research Topic

Testing the influence of Working Capital Management on profitability of


_________________________ sector firms in Pakistan
Research Objective
To examine the influence of average collection period of accounts receivables, days sales
in inventories, accounts payable turnover in days and cash conversion cycle on return on
total assets.

To test whether the relationship of profitability of the sector firms with selected financial
indicators follows the relevant theories. Also where there are any deviations, what are the
plausible reasons for the same?

1. Terms of Reference (TOR)/Guidelines

• Select any manufacturing sector as per Karachi Stock Exchange (KSE)


classification.
• Cover all or a substantial number (80 percent or more) of the companies in the
selected sector.
• Period to be covered: last five years (minimum).
• Financial indicators to be considered:
i) Current ratio
ii) Quick ratio
iii) Average collection period
iv) Days sales in inventory
v) Accounts payable turnover in days
vi) Cash conversion cycle
vii) Total debt to total assets
viii) Current Assets to total assets
ix) Current Liabilities to total assets
x) Inventory to Current Assets
xi) Accounts Receivable to Current Assets
xii) Return on assets (EBIT / Total Assets)
xiii) Return on equity
• Hypotheses should be developed for each indicator’s relationship with
profitability based on the relevant theory, which should also be explained.
• Hypotheses should be tested through computation of correlation of each variable
with profitability and pooled regression analysis. Stability tests should be
conducted to ascertain the degree of consistency of the results over the entire
range of data.
• For any clarifications and review of progress, at least one member of every group
should meet their professor once a week.
• Group presentations of reports will be conducted in the last working week of the
semester.
• As it is a group assignment, individual contribution will also be assessed through
a question to be answered by the students in the final examination.
• Reports containing irrelevant information outside the scope of the assignment will
not be acceptable.
• Grading will be on the basis of professional presentation, quality of report which
includes following proper research report format, neat presentation, analytical
content, references, bibliography and individual contribution.
• Number of pages: As many as required for covering the TOR. Meeting the
research objective is more important than making the report thick by loading it
with irrelevant or unnecessary information.
• Before starting the write up of your report, please discuss the outline/table of
contents with your professor.
• Group names should be submitted to the teacher in typed form on A4 size paper
and not on rough pages torn from your diaries or registers. The subject name,
semester, class section and sector chosen must be mentioned.
• Marks weightage of the report being significant (i.e. 30 percent), warrants a
commensurate effort on the part of each student.

Note: If your report meets acceptable standards, it will be published in the form of a
research article, in Pakistan Business Review (PBR) under your names.

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