The relationship between cash conversion cycle, ITS components and firm profitability evidence from listed non-service companies on Ho Chi Minh stock exchange
Abstract
This research study investigate the relation between cash conversion cycle,
its components (inventory period, receivable period, and payable period) and the firm
profitability. The regression results are estimated with the random effect in panel data.
With more than one thousand observations from the sample of 227 non-services
companies listed on Ho Chi Minh Stock Exchange during the period from 2009 to
2013, the regression results reveal that there is a significant negative correlation
between the firm profitability and cash conversion cycle, average collection period,
average payment period. However, there is no significant statistic correlation between
the firm profitability and average age of inventory. Those results suggest that
managers can improve the firm profitability by reducing the numbers of days account
receivable, account payable and cash conversion cycle to an optimal level.