IMPACT OF CASH CONVERSION CYCLE (CCC) ON PROFITABILITY OF TEXTILE INDUSTRY OF PAKISTAN

Abstract

The primary, objective of this study is to examine the relationship between the Cash Conversion Cycle (CCC) and the profitability of textile firms listed on the Pakistan Stock Exchange (PSX). The textile sector is one of the most significant contributors to Pakistan's economy, and efficient working capital management is crucial for its sustainability and growth. The study aims to assess whether managing the CCC effectively can enhance profitability. A quantitative research design was adopted. The study utilizes secondary data collected from the annual financial statements of textile firms listed on the Pakistan Stock i Exchange (PSX), covering a period of 10 years from 2015 to 2024. Profitability was measured through metrics such as Return on Assets, Return on Equity, or Net Profit Margin. The collected data was then entered on EViews 12, a statistical software used to analyze data, in order to determine the impact of independent variables on dependent variables. A panel data regression analysis technique was employed to evaluate the impact of the CCC on profitability, allowing the study to control for both cross-sectional and time-series variations across the firms. The results of the regression analysis revealed a significant negative relationship between the Cash Conversion Cycle and the profitability of textile firms in Pakistan. Firms with longer CCCs tend to have lower profitability. Delays in collecting receivables, folding inventory for extended periods, or postponing payables negatively affect financial performance. It concludes that reducing the Cash Conversion Cycle can enhance the profitability of textile firms in Pakistan.