the effect of cash conversion cycle and FIRM SIZE ON THE PROFITABILITY OF AUTOMOBILE SECTOR.

Abstract

Purpose- The aim of this research study is to analyze the impact of Cash conversion cycle on firm’s profitability of KSE listed companies of Automobile assembler & Automobile parts and accessories sectors in Pakistan. Methodology/sample- The sample size is 5 companies with the population of 22 companies of Automobile Assembler & Automobile parts and accessories sector in Pakistan with the longitudinal timeframe oftwelve years from 2007 to 2018. Using purposive sampling technique to draw the sample size. Statistical package of E-views software has been used to scrutinize the impact of independent variable over dependent variable. Cash conversion cycle (CCC) and firm size has been selected as independent variables while Return on asset (ROA) & Return on equity (ROE) has been selected as firm performance. Panel regression analysis, correlation, unit root test and other test has been run to investigate the impact. | : Findings- Findings reveals that the significant relationship between CCC and firm performance at 95% confidence interval. It is stated that CCC has a negative association with ROA and ROE predicting that smaller CCC will lead to higher performance. That’s mean firms must focus in decreasing their days in inventory outstanding and days in receivable outstanding while increasing ists significant positive impact offirm size on ROA but their days payable outstanding. There not on ROE. Larger firm size will give higher return on asset but not on ROE. Limitations- This study is limited to the Pakistani Automobile sector with the time frame offour month. The considered variables are limited while ignoring the other factors which may affect the ccc. Recommendations- Firm’s decreased DIO and DSO will lead to smaller CCC and make delays in payments to hold the cash for further constructive investments. Working capital and cash management must focused for further transaction to earn more returns.