The impact of cash conversion cycle on the firm performance: evidence from Cement sector of Pakistan

Abstract

Cash conversion cycle is an imperative tool in order to gauge the performance of the firms. The less the cash conversion cycle the more the firms are profitable. The main theme of the study is to check the impact of cash conversion cycle on the firm’s profitability of the cement sector of Pakistan. For the purpose of the research total 10 firms of cement sector are engaged that are listed on Pakistan stock exchange. 5 years data from 2013-2017 is conducted from the annual reports of the firms. The type of data used in the research is secondary data. The results are revealed by using three different tests including the descriptive analysis, correlation analysis and panel least square regression method. The E-views software is used to conduct the results. According to some previous researchers the authors have their divergent point of views. Some authors suggest that cash conversion cycle has positive impact on firms performance while the some authors suggests that cash conversion cycle has its negative impact on firm performance. This study finding suggest that cash conversion cycle has its significant negative relationship on return on asset, cash conversion cycle has its significant negative relationship on return on equity, cash conversion cycle has its significant negative relationship on net profit. Finally on the basis of results conducted we are saying that the cash conversion cycle has its significant negative relationship on firm’s performance of cement sector of Pakistan. The study is equally beneficial and useful for the future researchers and for the cement sector firms in Pakistan to improve their profitability by reducing the cash conversion cycle