Effect of Cash Conversion Cycle on Profitability of Fertilizer Sector of Pakistan

Abstract

Working capital management (WCM) is one of the main tasks of the financial manager of the company and has an important role in achieving the objectives, policies and achievements of the company and increasing shareholders' wealth. Cash conversion cycle (CCC) is a measure of WCM and controlling this cycle can affect a company's profitability. The association between the CCC and profitability of companies listed in KSE (with emphasis on the type of industry) was investigated in this study. The criterion ROE was used to measure the profitability. The study population is companies listed in KSE in fertilizer industry used a 7 companies as a sample. Time period to test the hypothesis include a period of five years based on financial statements from 2010 to 2014. The study has one hypothesis in which the relationship between the CCC and profitability has been tested in separately. Regression analysis has been used to test the hypothesis. Overall, the results shows that there is negative relationship exist between cash conversion cycle and profitability of firm in fertilizer sector.