Impact of Cash Conversation Cycle on Firm Profitability : A Study of

Listed Beverage Food and Tobacco Firms in Sri Lanka

Presented By
Mr.Kobalasingam Mathushan

Registration Number : 2015/BAD/122

Index Number :BAD15122

Held On 8th January 2020

Department of Accounting
Faculty of Management Studies & Commerce
University of Jaffna.
Sri Lanka.
 Statement of the problem
• Previous studies done in different countries and consider different sector have
proven various outcomes.

• In this way, the cash conversion cycle that are made by companies are
unstructured, inconsistent and incomparable across companies and industries.

• Therefore there is a strong need to study whether firms’ cash conversion cycle
influence on firm profitability made by companies in Sri Lanka.
 Research Questions

RQ1: What is the impact of cash conversion cycle on firm

profitability?

RQ2: Is there any relationship between cash conversion cycle and

firm profitability?
 Objectives of the Study

Primary objective:
• To identify the impact of cash conversion cycle on firm
profitability

Secondary objective:
• To examine the relationship between cash conversion
cycle and firm profitability
 Significance of the Study

• This study will aim to create awareness to managers about cash conversion cycle and firm
profitability

• This study is also different from any prior research when it only considers the beverage food
and tobacco sector in Sri Lanka.

• It is expected that findings of the study would be great use of policy makers, planners,
researchers and decision maker as well.
 Literature Review
Author’s Findings
T.Velnampy (2005) each organization is employing a lot of money in various projects.
Its success is depending on the ability to generate profitability.

Rathika , Nimalathasan (2012). Evaluated cash conversion cycle (CCC) and profitability of selected
listed manufacturing companies during the period from financial year 2006 to 2010. Their
results
revealed that return on assets (ROA)] are negatively correlated.
 Research Gap

• Previous researches were done mainly focusing on top companies in different

countries. In Sri Lanka , focus different sectors

• Past literatures show that positive , negative , significant and no relationship between
cash conversion cycle and firm profitability.

• From the above contradicting arguments about the previous findings, clearly shows
that there is a huge space to do the study again in Sri Lanka by taking large number of
sample and more number of variables in order to make new contribution to the extant
literature in the area of cash conversion cycle and firm profitability
 Conceptualization

Independent Variable Dependent Variable

Cash Conversion Firm Profitability

Cycle  ROA
 ROE
 Operationalisazation
KEY CONCEPT VARIABLE INDICATORS MEASUREMENT

Account receivable Average account receivable

period
×365
sales
Cash Conversion
Cycle Account payable Average account payable
(Independent variable) period
×365
purchase

Inventory turnover Average inventory

period
×365
Cost of sales

Return on Assets Net profit after tax

(ROA)
× 100
Total Assets
Firm Profitability
(Dependent variable)
Net profit after tax
Return on Equity × 100
Total equity
(ROE)
 Hypotheses

H1 : There is a significant impact of Cash Conversion Cycle on Firm

Profitability

H2 : There is a significant relationship between Cash Conversion

Cycle and Firm Profitability
 Research Methodology

Research Method Quantitative Analysis

Sample 23 listed firms in CSE, Sri Lanka.

Data sources Secondary Data (annual reports of selected firms)

Year 2014- 2018

Mode of analysis Descriptive statistics , correlation and regression analysis

 Limitations
• The study is limited to five years period only . A longitudinal study may
explain trends in human capital disclosure practices over time.

• The research consider only one medium of disclosure that is annual report..

• The size of sample can be extended to further improve efficiency of model.

 Expected Contribution of the Study

• This study will be expected to contribute a further understanding about the

cash conversion cycle on firm profitability in Sri Lanka.

• It is expected to create a new model for cash conversion cycle in the context of
Sri Lanka.
THANK YOU.