Abstract:
Purpose - This research study is conducted with the aim to understand the impact of cash
conversion cycle on the firm overall performance of FMCG in Pakistan.
Design/methodology/approach - FMCG sector of the economy is focused and ten
FMCG listed firms are selected from Pakistan Stock Exchange and the data for the period
of 2005 to 2015 is collected on the selected variables for the each firm to consolidate the
secondary data and regression model is applied on the data to extract the outputs using
statistical software i.e. Eviews. In this study the elements of cash conversion cycle that
includes days of sales outstanding, Days sales of inventory and days of payables
outstanding are used as the independent variable while return on assets and return on
equity are used as the proxy to determine the performance of the listed firms operating in
Pakistan.
Findings - The findings of the current research study clearly indicate that there is a
significant impact of days of sales in inventory and days of payables outstanding on the
return of assets of the firms that is used as the proxy indicator to determine the
performance of the firm. These two variables significantly impact the return on assets at 5
percent level of significance while there is not significant impact of days of sales in
outstanding on the return on assets of the listed firms in Pakistan. Similarly, the second
regression model of the current research study clearly indicates that there is a significant
impact of days of sales in inventory and days of payables outstanding on the return of
equity of the firms that is used as the proxy indicator to determine the performance of the
firm.
Practical implications - This research study helps the market professional and
researchers to understand the implications of cash management practices in the form of
cash conversion cycle and its resultant impact on the firm’s overall performance.
