The Effects of Cash Conversion Cycle on Profitability: An Insight into the Agriculture and Food Industries in Thailand

Linh, Nguyễn Thị Phương; Mohanlingam, Sundaresan

doi:10.22452/ajba.vol11no1.4

Cited by 18 publications

(12 citation statements)

References 12 publications

(24 reference statements)

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“…The findings are similar to those of Ogunlade, Oseni and Adeyemi (2021) who found that creditors' conversion period (CCP) had no relationship with financial performance. The findings, nevertheless, differed with those of Linh and Mohanlingam (2018) whose study exhibited a favourable correlation between the two. They also differed with those of Le, Vu, Du, and Tran (2018) who found that creditors payment period had a negative effect on financial performance.…”

Section: Effect Of Creditors Payment Period On Financial Performancecontrasting

confidence: 74%

Working Capital Management and Financial Performance of Agricultural Firms Listed on Nairobi Securities Exchange, Kenya

Githiga

2023

JOFA

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The3listed firms3in Kenya have been experiencing declining and inconsistent performance in the recent years. The study sought to3establish effect of working3capital management3on financial performance of3agricultural firms3listed on Nairobi Securities Exchange. Specifically, study established the influence of accounts receivable collection period on5financial performance; determined5the effect of creditors5payment period5on financial performance; established3effect of operating cash3flow on3financial performance; and determined5effect of inventory5turnover on3financial performance and establish the controlling effect of firm size on the relationship between working capital and financial performance of agricultural firms listed on Nairobi Securities Exchange. The study3would be important for policy, practice and theory. The study3was based on3agency theory, transaction cost3theory, Miller-Orr Model and Baumol’s Model which formed the theoretical basis for this research. This research adopted a descriptive research and correlational research designs. This study’s 5target population comprised seven agricultural5firms listed on the NSE sampling seven5agricultural firms’ listed5on the NSE between 2016 and 2022 using a census survey. Data was obtained from secondary sources for a period between 2016 and 2022. Panel regression, descriptive and correlation statistics were used for analysis. The study established a negative correlation between accounts receivable collection period and financial performance. The study also revealed that creditor’s payment period had a positive but insignificant relationship with financial performance of the sampled firms. Moreover, there was a positive significant relationship between cash flows and financial performance. This study, therefore, concluded that there exists a positive significant relationship between cash flows and financial performance of agricultural3firms listed on Nairobi Securities Exchange. This study, therefore, concluded that accounts receivable collection period has a significant negative relationship with financial performance of agricultural3firms listed on Nairobi Securities Exchange. The study recommends that agricultural3firms listed on Nairobi Securities Exchange reduce their accounts receivable collection period; increase their operating cash flows; and reduce their inventory turnover period for increased financial performance. Keywords: Capital management, accounts receivable collection period, creditors’ payment period, operating cash5flows, inventory turnover period, firm size5 Financial Performance

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Section: Effect Of Creditors Payment Period On Financial Performancecontrasting

confidence: 74%

Working Capital Management and Financial Performance of Agricultural Firms Listed on Nairobi Securities Exchange, Kenya

Githiga

2023

JOFA

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“…Extensive studies have been done to determine the influence of the CCC on the profitability of companies in various manufacturing industries, with diverse findings ranging from negative to positive, and inconsequential to considerable. For instance, the negative significant effects of CCC on corporate profitability have been found by some researchers, such as Chang (2018), Deloof (2003), Garc ıa-Teruel and Mart ınez-Solano (2007), Jakpar et al (2017), Jaworski and Czerwonka (2022), Linh and Mohanlingam (2018), Mmaduka et al (2022), Nwude et al (2018) and Al-Mohareb (2019), while Mandalaputri et al (2021) have found insignificant positive effects. On the contrary, Lin and Lin (2021), Gill et al (2010) and Amahalu and Beatrice O (2017) have found a significant positive impact of the cash cycle on a firm's profitability, while, AL-Zararee et al (2021), Kasozi (2017), Mbathi et al (2021) and Chowdhury et al (2018) have found positive but insignificant impact.…”

Section: Introductionmentioning

confidence: 93%

Cash conversion cycle and financial performance: evidence from manufacturing firms of Bangladesh

Karim

Mamun

Kamruzzaman

2023

AJEB

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PurposeThe purpose of the present study is to determine how the cash conversion cycle (CCC) affects the financial performance of manufacturing companies in Bangladesh.Design/methodology/approachThe authors have collected data of 61 Dhaka Stock Exchange (DSE)-listed firms from the 10 distinct manufacturing industries of Bangladesh for 18 years, from 2003 to 2020. The data have been analyzed through the two-steps system generalized method of moment (GMM) regression model, using profitability indicators return on asset (ROA) and earnings per share (EPS) as dependent variables, while CCC has been used as the independent variable, whereas asset turnover (ATO) and financial leverage (LEV) were used as control variables to assess the relationship between the CCC and financial performance.FindingsThe findings indicated that CCC has a negative connection with profitability – ROA and EPS, with the connection between CCC and EPS being highly significant. This indicates that reducing the inventory conversion time, reducing the period of receivable collection and making payments to creditors with potential delays might help Bangladeshi manufacturing firms boost their profitability. In addition, the firm-specific characteristics, namely ATO and LEV significantly affect the firm's profitability.Research limitations/implicationsThe research was based only on secondary sources and information was scarce. This research was conducted to determine the impact of the CCC on the corporate profitability of the manufacturing sector solely. There might be many other working capital variables that are still unexplored through this study.Practical implicationsThe current study's findings are consistent with the traditional rule that minimizing the firm's days of the cash cycle may optimize financial performance. The results of this research have added to the existing body of knowledge on the topic of working capital management (WCM). Future research endeavors can be initiated for assessing the impact of the CCC on the firm's profitability in other industrial sectors or to identify other working capital variables that have much impact on corporate profitability.Originality/valueThis study is an original work of the researchers and adds value to the current literature in the domain of WCM and corporate profitability. The present study is the first one that covers firms in all the manufacturing industries in Bangladesh. The corporate managers, creditors, investors and other concerned stakeholders will be benefited from the findings of the present study.

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“…There was no evidence of an association between cash collecting cycle and profitability. [26]. financial performance, which is measured by the net profit margin, return on asset ratio, and return on equity ratio, and the independent variable of cash management, which is evaluated by the cash ratio and operating cash to debt ratio, is shown in the graph above.…”

Section: F1 Cash Conversion Cyclementioning

confidence: 99%

Effect of Cash Management on the Retail Industry's Financial Performance

Cabildo¹,

Marcelo²,

Angeles³

et al. 2022

int. j. eng. mgmt. res.

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For all firms to improve their financial management and ensure their financial sustainability, cash management is essential. Each organization needs to use sophisticated cash management procedures in order to achieve its goals. The retail sector is also one of the most important for the growth of the Philippine economy and the creation of jobs, thus this study looked empirically at the impact of cash management on the financial performance of the sector over a five-year period, from 2016 to 2021. To determine whether cash management has had an effect on these five (5) significant retails organizations' financial performance, the study looks at their financial statements. The data was gathered from each retail company's financial statement and website on the Philippine Stock Exchange Edge website. The study used the cash management ratio, or Cash Ratio (CR), as the independent variable, and the financial performance ratios, or Return on Assets (ROA), Return on Equity (ROE), and Net Profit Ratio, as the dependent variables. In order to ascertain the correlations between different aspects of cash management and financial success, numerous regression and correlation analysis on the data were performed. The research found that the selected five (5) retail enterprises' financial performance was positively but marginally impacted by the Cash Ratio. The report thus advises that these key firms in the Philippine retail sector execute their cash management effectively in a way that enhances financial success.

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The Effects of Cash Conversion Cycle on Profitability: An Insight into the Agriculture and Food Industries in Thailand

Cited by 18 publications

References 12 publications

Working Capital Management and Financial Performance of Agricultural Firms Listed on Nairobi Securities Exchange, Kenya

Working Capital Management and Financial Performance of Agricultural Firms Listed on Nairobi Securities Exchange, Kenya

Cash conversion cycle and financial performance: evidence from manufacturing firms of Bangladesh

Effect of Cash Management on the Retail Industry's Financial Performance

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