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The relationship between cash flow and capital expenditure in the sugar industry of Pakistan

Author

Listed:
  • Syed Gouhar Ali Qandhari
  • Malik Muhammad Sheheryar Khan
  • Wafa Rizvi

    (Iqra University, Pakistan
    Australian Institute of Business, Australia
    DNA Research, Pakistan)

Abstract

Free cash flow and capital expenditure go side by side in industries all over the world. There appears to be a good balance between dividends to shareholders and capital expenditure in the firms. Capital expenditure allows companies to enhance production techniques and quality maintenance. Pakistan is an agriculture-driven economy and does not enjoy industrial growth and incremental GDP annually. Through this study, an effort was made to prove that free cash flow is used for capital expenditure in the sugar industry of Pakistan. Annual financial statement data for 27 sugar mills of Pakistan, listed on Karachi Stock Exchange (KSE), was taken to calculate free cash flow and annual capital expenditure over the 2000-2011 periods. Linear regression test was run on the secondary data to study the relationship between the two variables. The results hence proved that a relationship exists between the two. The study shows that free cash flow in the sugar industry of Pakistan is used for capital expenditure among other things; it can be used as dividends among shareholders or held back as retained earnings.

Suggested Citation

  • Syed Gouhar Ali Qandhari & Malik Muhammad Sheheryar Khan & Wafa Rizvi, 2016. "The relationship between cash flow and capital expenditure in the sugar industry of Pakistan," Journal of Developing Areas, Tennessee State University, College of Business, vol. 50(6), pages 341-353, Special I.
    • Handle: RePEc:jda:journl:vol.50:year:2016:issue6:pp:341-353
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    Cited by:

    1. La Madjid Samryn, 2023. "Financing Moderation in the Relationship of Investing Activities and the Bank Capital Adequacy Ratio," International Journal of Business and Management, Canadian Center of Science and Education, vol. 18(3), pages 1-64, June.

    More about this item

    Keywords

    Free cash flow; Capital Expenditure;

    JEL classification:

    • G - Financial Economics

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