Cash Flow Volatility and Trade Credit in Pakistan

Purpose of the study: - In this paper, we are studying the relationship between cash flow volatility with the trade credit in Pakistan (Companies registered in Pakistan). Design /Methodology/Approach: - In this study, we have taken 100 companies registered in Pakistan we have summary statistics as well as we have done regression testing on variables for our study, for observing the relationship between cash flow volatility and trade credit in Pakistan, we have taken data for our variables from 100 companies registered in Pakistan the data for our study is from the period of 2011 to 2020.Observation: -We have observed that Trade Receivables, inventory, leverage, and net trade days have a significant and positive effect on Cash Flow volatility. On the other hand, the impact of Cash Flow volatility on trade payables and receivables seems inconclusive. Net Trade Credit ratios seem to negatively impact Trade Payables ratios and positively impact Trade Receivables ratios. Trade days also negatively affect both Trade Payables and Receivables variables. Leverage and inventory also seem to positively affect both Trade Payables and Receivables variables.The implication in businesses: - Trade credit is very important for any business as well as for their support and for the economics which helps the business to develop and to improve in the current situation as well as for the future. it is one of the most crucial factors for the business, as the business depends on the trade credit. If the cash flow volatility of the company or a business is high then it is hard for the companies or businesses to maintain their investment in trade credit which affects the companies or businesses’ efficiency and performance