taimoor khanzada reseach proposal (2914).doc
TRANSCRIPT
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Cash Conversion Cycle & Firms Performance of Pakistani Firms
A thesis submitted
By
Muhammad Taimoor Khanzada (2914)
To
Dr. Muhammad Azam
Department of Business Administration
n partia! fu!fi!!ment of
The re"uirement for the
De#ree of
MA$T%& ' B$*%$$ ADM*$T&AT'*
n*A*+%
This thesis has been
a,,epted for the fa,u!ty of
A+-T ' B$*%$$ ADM*$T&AT'*
by/
000000000000000000000000000
Dr. Muhammad Azam
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Abstract
This study ana!yzes the impa,t of +ash +onersion +y,!e on firm profitabi!ity and
performan,e from manufa,turin# se,tors !isted in Kara,hi $to, %3,han#e. ane!
finan,ia! data of si3 manufa,turin# se,tors 5ith different samp!e sizes has been taen for
fie years (2664 to 2669). +anoni,a! re#ression has been used as a statisti,a! te,hni"ue to
obtain the resu!ts for identifyin# the impa,t of four independent ariab!es of +ash
+onersion +y,!e on t5o dependent ariab!es of firm7s profitabi!ity and performan,e.
The ana!ysis ,on,!uded that +ash +onersion +y,!e has a si#nifi,ant impa,t on firm7s
performan,e and profitabi!ity. Mana#ers ,an improe their firm7s profitabi!ity and
performan,e by redu,in# nentory turnoer in days8 Aera#e re,eiab!e turnoer in days
and +ash +onersion +y,!e8 5hi!e the in,rease in A,,ounts payab!e turnoer in days 5i!!
enhan,e the profitabi!ity and performan,e of the firm8 5hi,h 5i!! ma3imizes the 5ea!th
of shareho!ders 5hi,h is the u!timate #oa! of any or#anization.
Key Words: Cash Conversion Cycle, Firms Performance
Table of contents
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Abstract--------------------------------------------------------------------------------------
2
1. ntrod!ction--------------------------------------------------------------------------- "
1.1 Ba,#round:
1.2 rob!em statement ;
1.< &esear,h "uestions ;
1.4 'b=e,ties of the resear,h ;1.> $i#nifi,an,e of the study?
1.: $,ope of the study ?
1.; -imitations?
1.? De!imitations ?
2 #iterat!re $evie%----------------------------------------------------- 16
< ethodolo'y------------------------------------------------------------ 14
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4.8.(b) $tandardized +anoni,a! +oeffi,ients for the irms7
erforman,e @ariab!es---------------------------------------------------- 444.9. +orre!ation bet5een the +++ @ariab!es and their
+anoni,a! @ariab!es4>4.16. +orre!ation bet5een the irms7 erforman,e @ariab!es
and their +anoni,a! @ariab!es 4:4.11. +orre!ations bet5een the +++ @ariab!es and the +anoni,a!
@ariab!es of the irms7 erforman,e @ariab!es 4;
4.12. +orre!ations Bet5een the irms7 erforman,e @ariab!es and
the +anoni,a! @ariab!es of the +++ @ariab!e 4?
5. Concl!sion------------------------------------------------------------------ >6
>.1. +on,!usion---------------------------------------------------------------- >6
>.2. indin#s------------------------------------------------------------------- >1
>.1
>.4. uture &e,ommendations------------------------------------------------- >1
:. $eferences------------------------------------------------------------------ >2
Cha)ter * +
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+ ntrod!ction++ ack'ro!nd:
+ash is !ifeb!ood of any or#anization or business in order to meet its ob!i#ations. A +ash
+onersion ,y,!e measures the time span of a ,ompany8 5hi,h taes to ,onert its
inentory into ,ash8 re,eie ,ash from its re,eiab!es and sett!e its payab!es. n
,orporations ,ash ,onersion ,y,!e is an important indi,ator for inestors in order to
de,ide about their future inestment and earnin#s re#ardin# the industry. +++ represents
the !i"uidity of a firm 5hi,h sho5s the finan,ia! stren#th of the ,ompany. orin#
,apita! mana#ement of any ,ompany heai!y depends on ,ash ,onersion ,y,!e 5hi,h
in,!udes ,ertain ratios !ie inentory turnoer in days8 payab!e period in days8 re,eiab!e
period in days et,. inan,ia! ana!yst indi,ates that ,urrent ratios of a firm are the ey
indi,ators of the !i"uidity of a ,ompany as they affe,t the profitabi!ity and the maret
a!ue of the or#anization8 5hi,h sho5s the future inestment abi!ity of a ,ompany.
$upp!ier is a ey fa,tor to the business performan,e and supports 5ide!y to #ro5
the business effe,tie!y and effi,ient!y. $upp!iers in aistan are ery ,ash ,ons,ious and
5ant their re,eiab!es to sett!e as soon as possib!e8 so if the ,ompanies hae !ar#e ,ash
,y,!e than it 5i!! be diffi,u!t for the ,ompany to sett!e its payab!e "ui,!y8 5hi,h may
harm its maret a!ue in the eyes of supp!iers. or main# payment to supp!iers "ui,!y8
,ompany has to re,oer its money from its ,ustomers and try to desi#n effi,ient ,redit
po!i,ies in order to hae fast !i"uidity8 5hi,h he!ps in in,reasin# the profit of the
,ompany. ndustries of aistan ,ontribute a ma=or share in the e,onomy of aistan.
$in,e the pri,es of a!! basi, #oods are sensitie to the e,onomi, #ro5th of the ,ountry
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be,ause of 5hi,h these industries are ma=or p!ayer of the finan,ia! maret. ndustries in
aistan hae fa,ed many ,han#es after the e,onomi, do5nfa!! in the 5ho!e 5or!d. The
period of 266> to 2669 is the post re,ession period8 durin# 5hi,h many ,han#es hae
o,,urred in the inestor7s behaior8 po!i,ies8 ,onfiden,e !ee! of businessmen and so
many other thin#s. The ,han#es in the aistan7s Ta3es8 nestin#8 etro!eum and
different po!i,ies hae !eft a si#nifi,ant impa,t on the business of many ,ompanies8
5hi,h re"uires to be ,onsidered for resear,h in order to ana!yze its effe,t for future
po!i,ies.
+. Problem /tatement:
A resear,h 5as done (Abdu! &ehman Mohammad *asr8 266;) on the effe,ts of
,ash ,onersion ,y,!e on the performan,e of !isted ,ompanies in K$% and 5as
#enera!ized on a!! the se,tors in the business industry of aistan8 5hi,h is not
appropriate8 be,ause different se,tors hae different nature of business8 5hi,h a!so affe,ts
de,isions re#ardin# their !i"uidity and optima! usa#e of 5orin# ,apita!. This resear,h
5i!! e3hibit a!! the impa,ts of different finan,ia! ratios and the ,ash ,onersion ,y,!e on
profitabi!ity8 !i"uidity and maret a!ue of different business se,tors. This si#nifi,ant
dis,ussion of ,ash ,onersion ,y,!e8 its different ,omponents and its ,onse"uen,es on
su,,ess !eads to the "uestions 5hi,h 5i!! be ana!yzed/
+0 $esearch 1!estion:
Does ,ash ,onersion ,y,!e impa,t ary on different manufa,turin# business se,tors of
aistanC
+2 3b4ectives of the $esearch:
or the ana!ysis of these "uestions8 hae ,ome up 5ith ,ertain ob=e,ties8 5hi,h
5i!! e3hibit si#nifi,ant aspe,t of ,ompany7s finan,ia! positions of 16 different se,tors8
5hi,h are taen as a resear,h samp!e !isted in K$%. The ,ore ob=e,ties of this resear,h
are as fo!!o5s/
1 The ,onne,tion bet5een data e3tra,ted from the finan,ia! statements 5i!! be
tested 5ith the he!p of statisti,a! ana!ysis too!s.
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2 The ea!uation of the impa,ts of arious ,omponents of ,ash ,onersion ,y,!e
on profitabi!ity and earnin# per share.
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the effe,ts of the ariab!es re!ated to 5orin# ,apita! mana#ement 5hi!e there are a!so
other areas of finan,e 5hi,h are re!ated to firm7s performan,e.
Cha)ter * .
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. #iterat!re $evie%
Different affe,ts of orin# +apita! mana#ement on the profitabi!ity of !isted firms has
been ana!yzed in the !iterature. @arious empiri,a! studies Abdu! &ehman Mohammad
*asr (266;) and Ta!at Afza and Mian $a=id *azir8 266;E on the affe,ts of orin#
+apita! mana#ement on profitabi!ity of firms #uided us to se!e,t a set of e3p!anatory
ariab!es that are 5ide!y used and found to be important for the resear,h. or e3amp!e
M. A. Fariya5ati8 et a!8 (266;)G Amar=it Hi!! et a!8 (2616)G Katerina -yroudi8 Iohn
-azaridis8 (2666)G A!i yar8 (2669) and Daid M.Mathua8 (2669)E ea!uated ho5
orin# +apita! mana#ement re!ates to the profitabi!ity8 size and !i"uidity of the firms.
$eera! resear,hers hae studied the effe,ts of orin# +apita! mana#ement on arious
profitabi!ity ariab!es of the firms in different re#ions of the 5or!d. Those ariab!es
in,!ude ,ash ,onersion ,y,!e8 earnin# before ta38 size of the firm and !i"uidity.
Ta!at Afza and Mian $a=id *azir8 266;8 Abdu! &ehman Mohammad *asr8 266;8 M. A.
Fariya5ati8 et a!8 266;8 .M Amir $hah and Aisha $ana8 266:8 Amar=it Hi!! et a!8 2616 and
Daid M.Mathua8 2669 ea!uated the affe,ts of orin# +apita! mana#ement on the
profitabi!ity8 !i"uidity and performan,e of the firms by usin# '-$ mode!. They find the
ne#atie re!ationship bet5een orin# +apita! mana#ement and profitabi!ity of the firm.
They a!so ,on,!uded that de,rease in ,ash ,onersion ,y,!e in,reases the return to share
ho!ders of the firms. $imi!ar!y many resear,hes hae been done on these ariab!es 5ith
different mode!s !ie affe,ts of !i"uidity8 !eera#e and size on the profitabi!ity of the firms
(Manue! -. Iose et a!8 199:)8 (J. Iama! Fubairi and Abdu! &ashid8 266>).There are a!so
some other resear,h re!ated to these ea!uations !ie effe,ts of +apita! e3penditure on
orin# +apita! mana#ement (B.A &an=ith Appuhami8 266?)8 +orporate +ash Jo!din#s
of the firm on diidend payments8 !eera#e and firm size (o!f#an# Drobetz and
Matthias +. Hrnin#era8b8 266:)8 affe,ts of hed#in# on firm7s a!ue (Aziz A. -ooman8
2664).
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The +ash +onersion +y,!e is one of the ma=or ,omponents of orin# +apita!
mana#ement. t is a!so important for those ,ompanies 5hi,h hae !i"uidity prob!ems or
run their most of the business on ,ash basis. +++ determines the performan,e of any
business or#anization re#ard!ess of the business nature. The studies that find a ne#atie
re!ationship of +++ on firm profitabi!ity and performan,e are/ Abdu! &ehman
Mohammad *asr8 (266;)G A!i yar8 (2669)G M. A. Fariya5ati8 et a!8 (266;)G Ta!at Afza
and Mian $a=id *azir8 (266;)G *or %di Azhar Binti Mohamad8 *oriza Binti Mohd $aad
(2616)G Juyn# hon# Don#8 Iyhtay $u8 (2616)E. There are a!so some studies that
ea!uate a positie re!ationship of ,ash ,onersion ,y,!e on profitabi!ity and performan,e
of the firm8 5hi,h are/ Amar=it Hi!! et a!8 (2616)G Katerina -yroudi8 Iohn -azaridis8
(2666)E. Daid M.Mathua (2669) had stated that in,rease in a,,ount re,eiab!e turnoer
and inentory turnoer de,reases the profitabi!ity 5hi!e in,rease in a,,ounts payab!e
turnoer in,reases the profitabi!ity of the firms8 5hi!e these ,!aims 5ere a!so supported
by Kesseen ada,hi8 266: by findin# these effe,ts on different se,tors in $M%7s by
usin# independent samp!e ttest. $.M Amir $hah and Aisha $ana (266:) a!so
a,no5!ed#e these ,!aims in the study of oi! and #as se,tor of aistan. A!! the aboe
studies used the statisti,a! te,hni"ue of re#ression for the ana!ysis8 e3,ept A!i yar
(2669) 5ho imp!emented A*'@A te,hni"ue for determinin# the differen,es in se,torsaera#e resu!ts.
Manue! -. Iose et a!8 (199:) ,!aimed that a##ressie 5orin# ,apita! po!i,ies resu!ts in
hi#h profitabi!ity and moreoer stated that in industries 5here a##ressie 5orin# ,apita!
po!i,ies are profitab!e8 the profit appears in terms of both &eturn on Assets (&'A) and
&eturn on %"uity (&'%). +ontrary to Manue! -. Iose et a!8 (199:)G Ta!at Afza and Mian
$a=id *azir (266;) stated ne#atie affe,ts of a##ressie inestment and finan,in#
de,isions on maret rate of return and ris of the firms by usin# return on assets8 e"uity
and Tobin7s " as profitabi!ity indi,ators. urther empiri,a! studies (Iames A. Hentry8 et a!)
,on,!uded that 5ei#hted operatin# ,y,!e and 5ei#hted ,ash ,onersion ,y,!e he!ps the
mana#ement to shorten the ,ash ,onersion ,y,!e of the ,ompany8 5hi,h represents the
effi,ient 5orin# ,apita! mana#ement of the or#anization.
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Those firms 5hi,h ho!d more ,ash ensure their ,ontinuous inestment 5hether their ,ash
f!o5 is ery !o5 or the fund in the maret is e3pensie8 as in diffi,u!t period7s e3,ess
,ash !eads the firm to aoid re"uired ,han#es (Tim '!per et a!8 199;). n re!ation of this
resear,h (o!f#an# Drobetz and Matthias +. Hrnin#era8b8 266:) sho5ed ne#atie
re!ation bet5een assets tan#ibi!ity and positie re!ation of Diidend payments 5ith ,ash
ho!din#s and non !inear re!ation bet5een !eera#e and ,ash ho!din#s 5hi!e firm size has
no fast impa,t on ,ash.
The +ash ,onersion ,y,!e of !isted ,ompanies is ery important for their profitabi!ity in
order to ma3imize the return to shareho!ders and inestors. eop!e inest in those
,ompanies 5here the returns are hi#h and ,ontinue. A,,ordin# to the !iterature the most
appropriate approa,h is to shorten +++ to ma3imize profitabi!ity for to attra,tin#
inestors and #ro5 a,,ordin#!y. As the methodo!o#y used in the aboe !iterature is
re#ression ana!ysis a,,ordin# to the nature of the data 5hi,h seems most re!iab!e for the
ana!ysis be,ause of sho5in# si#nifi,ant resu!ts ea!uated in the studies.
As the ob=e,tie of this resear,h is to find out the affe,ts of +ash +onersion +y,!e on
firms performan,e of aistani firm7s in different se,tors8 therefore there is !ot of
resear,h !iterature re!ated to the study fo,used on the f!o5 of +ash +onersion +y,!e and
its affe,ts on the different performan,e ratios of the firm. This study departs from
aai!ab!e !iterature as the study 5i!! find the affe,ts of +++ on the performan,e of the
different se,tors !isted in K$%.
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Cha)ter * 0
0 ethodolo'y
This ,hapter 5i!! e3hibit the method and te,hni"ues use to ,ondu,t the resear,h 5ith a
suitab!e frame5or. t in,!udes resear,h approa,h8 purpose and desi#n8 popu!ation and
samp!e size8 data and data ,o!!e,tion te,hni"ue 5ith their reasonin# mandatory for the
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study. The intention is to made the understandin#s and simp!ifi,ation of the steps re!ated
to the resear,h.
0+$esearch A))roach
This study is fo,used on the effe,ts of ,ash ,onersion ,y,!e on firm7s performan,e and
used Luantitatie resear,h approa,h in order to ana!yze resu!ts and its ,on,!usion. n
Luantitatie approa,h primary or se,ondary data is used for ana!ysis 5hi,h is ,o!!e,ted in
the form of numeri,a! a!ues.
$tatisti,a! tab!es8 #raphs and measurab!e a!ues 5hi,h sho5 resu!ts are used for the
presentation and on the basis of that presentation ,on,!usions and re,ommendations hae
been made by the resear,hers. Luantitatie approa,h possesses ob=e,tiity in its study
and their resu!ts are more abso!ute and do not re"uire any "ua!ifi,ation. This approa,h
has been used by the resear,her in order to find out effi,ient resu!ts 5ith reasons.
0. $esearch (esi'n
Due to a "uantitatie resear,h approa,h and hain# a time series data 5ith numeri,a!
a!ues the resear,h desi#n used in this study is +orre!ation resear,h desi#n. This ,o
re!ationa! resear,h ea!uates the de#ree of re!ationship e3ist bet5een the t5o ariab!es5hi,h are dependent and independent ariab!es and he!ps in app!yin# an appropriate
statisti,a! te,hni"ue for ana!ysis by ,reatin# a a!id statisti,a! mode!. t a!so he!ps in
bui!din# hypothesis for the ana!ysis of the data 5ith #reater a,,ura,y in the resu!ts and
in,rease ,onfiden,e in the out,ome of the resu!ts and ensures not to hae any ambi#uity.
The de#ree of re!ationship bet5een these t5o or more "uantifiab!e ariab!es e3pressed as
,orre!ation ,oeffi,ient.
00 odel
The foundation of this resear,h is to e3amine the ,ause and effe,t of Aera#e ,o!!e,tion
period8 inentory turnoer8 A,,ounts payab!e turnoer and +ash ,onersion ,y,!e of
different industries on net operatin# profit and %arnin# per share of those industries. or
Ana!yzin# the +ause and %ffe,t of independent ariab!es on dependent ariab!es 5e hae
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estab!ished si3 ariab!es out of 5hi,h four are independent ariab!es and t5o are
dependent ariab!e.
n order to test the estab!ished hypothesis empiri,a!!y8 the mode! ,an be desi#ned under/
3(8#:
++++=+
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J1a/ Aera#e ,o!!e,tion period8 inentory turnoer8 A,,ounts payab!e turnoer and ,ash
,onersion ,y,!e has si#nifi,ant effe,t on net operatin# profits and %arnin#s er share.
05 /tatistical Techni!e
The statisti,a! te,hni"ue used in this resear,h is ,anoni,a! re#ression. The reasons for
usin# ,anoni,a! re#ression are t5o find the effe,t of different metri, independent ariab!e
on t5o metri, dependent ariab!es. +anoni,a! re#ression is the substitute of mu!tip!e
re#ressions 5hen dependent ariab!e in,reases upto t5o or more in the re#ression mode!.
0" /tatistical Tool
This study in the fie!d of ,orporate finan,e used $tatisti,a! a,a#e for $o,ia! $,ien,e
($$$) and $tatisti,a! Ana!ysis $ystem ($A$) too!s for the ana!ysis of the data to present
resu!ts and #ie ,on,!usion re#ardin# the resear,h.
06 (ata /o!rce
This study needs se,ondary data to be e3tra,ted from the finan,ia! statements of the
,ompanies !isted in K$%. Therefore data is ,o!!e,ted from $tate Ban of aistan18
edera! bureau of statisti,s2and e,onomi, surey of aistan. Annua! a,,ounts of the
!isted ,ompanies of different se,tors 5ere a!so referred for ariab!es. The main purpose
of the study is to ana!yze the effe,ts of +ash ,onersion ,y,!e on firm7s performan,e of
aistan. The time period data of dependent and independent ariab!es has been taen on
year!y basis from 2664 to 2669.
07 ;ariable (escri)tion
The urpose of this resear,h is to find out the inestment opportunities in different
manufa,turin# se,tors businesses in aistan. As 5orin# ,apita! mana#ement is a eryimportant phase of finan,ia! mana#ement 5hi,h si#nifi,ant!y affe,ts the profitabi!ity of
firms ana!yzed in preious studies8 this study 5i!! add more understandin#s of finan,ia!
mana#ement re#ardin# the inestment de,isions re!ated to aistan7s business s,enario.
1http/OO555.statpa.#o.pOdeptsOinde3.htm!2http/OO555.sbp.or#.pOe,odataOinde32.asp
http://www.statpak.gov.pk/depts/index.htmlhttp://www.sbp.org.pk/ecodata/index2.asphttp://www.statpak.gov.pk/depts/index.htmlhttp://www.sbp.org.pk/ecodata/index2.asp -
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n this resear,h 5e 5i!! study the effe,ts of +ash +onersion +y,!e on the performan,e
indi,ators of 16 different manufa,turin# se,tors !isted in K$%. The des,ription of the
re!ated ariab!es of the resear,h are #ien be!o5
07+ Avera'e Collection Period in days
Aera#e ,o!!e,tion period e3hibits the information about the ,ash
,o!!e,tions 5ith in period of time of any or#anization from its sa!es. Many
,ompanies in the maret se!! their produ,ts or seri,es on ,redit basis in
order to in,rease their sa!es and than ,o!!e,t ,ash after ,redit period to
fa,i!itate the ,ustomers.
The period of ,o!!e,tin# ,ash is ery important for any or#anization in
order to maintain their business as it is a !ife b!ood for any or#anization.
+ompanies do this a,tiity of ,o!!e,tin# ,ash 5ith the defined ,redit terms
and po!i,y.
The ,o!!e,tion of ,ash depends on the ,redit terms of businesses due to the
responsibi!ity of a parti,u!ar department to re,eie their ,o!!e,tions from
,ustomers. t is ,a!,u!ated by diidin# a,,ounts re,eiab!e from sa!es and
mu!tip!yin# it from days.
07. nventory T!rnover in days
nentory turnoer in days represents ho5 many times inentory
pur,hased from the maret and issued to the produ,tion of the ,ompany. t
is a ariab!e 5hi,h sho5s the produ,tion effi,ien,y of any or#anization
re#ardin# the pur,hases of the inentory. t is ,a!,u!ated by diidin#
inentories from pur,hases and mu!tip!yin# it from days.
070 Acco!nts Payable T!rnover in days
A,,ounts payab!e turnoer te!!s the time ,ompany taes to pay the amount
of ,ash to the supp!iers of the business. t is a ery important ratio for
ho!din# ,ash 5ithin the ,ompany in order to inest in the maret to earn
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profit. t is ,a!,u!ated by diidin# a,,ounts payab!e from ,ost of sa!es and
mu!tip!yin# it from days.
072 Cash Conversion Cycle
t is a ,omprehensie time period ,a!,u!ated by addin# a,,ounts re,eiab!e
turnoer in days in inentory turnoer in days and by subtra,tin# a,,ounts
payab!e turnoer in days. t represents the 5ho!e ,ash ,y,!e of any
or#anization and its ,ash f!o5s re#ardin# its business. t he!ps in
identifyin# the 5orin# ,apita! of any business uses by the or#anization.
075
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Cha)ter * 2
2 (ata Analysis
2+ ntrod!ction
n this phase of resear,h 5e ana!yze the data ,o!!e,ted from the annua! reports of the
!isted manufa,turin# ,ompanies and the !ibrary of state ban of aistan. By ana!yzin#
the data 5e ,an e3tra,t the information 5hi,h is used for main# summary ,on,!usion
of the resear,h.
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Table 2+: /!mmary /tatistics
Chemical /ector 8ner'y /ector
/* ;ariable < ean/td
(evin a= < ean /td (ev in a
+
Avera'e
CollectionPeriod >in
(ays?
1:2 6 .?> 6.6: 1?:.24 16< :6.
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Period >in
(ays?
2
Cash
Conversion
Cycle
9: 1?.?> 9>.14 1?:.?? ?.:? >:: 4 ?.:; 21.26 :: 6.:< 1.21 2.in
(ays?
1?4 119.?1 26.>> 1>?9.?? ?; 4.12 6.;> 2.9> ?.:6
2
Cash
Conversion
Cycle
1?4
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and the ma3imum of 992.9? days. Aera#e ayment eriod in days has a minimum of
9.: days. +ash +onersion +y,!e has a minimum of
414. %arnin# per $hare has a
minimum of 1>9.:6 and ma3imum of ?:.16.
$u#ar se,tor has a tota! samp!e size of 9:. @ariab!es in %ner#y se,tor are Aera#e
,o!!e,tion period in days8 nentory Turnoer in days8 Aera#e ayment eriod in days8
+ash +onersion +y,!e8 *et 'peratin# rofit and %arnin# per 5ith a mean a!ues of
9.;;8 ?6.;18 ;1.:8 1:4 hain# standard deiation of 11.;48 ?:.?;8
>4.>.148 2>9.92 and ?.:;. n %ner#y $e,tor8 Aera#e +o!!e,tion eriod has a
minimum of 6.61 day and the ma3imum of ;?.>4 days. nentory Turnoer in days has a
minimum of 6.?9 day and the ma3imum of 4:? days. Aera#e ayment eriod in days
has a minimum of 9.:; days and a ma3imum of days. +ash +onersion +y,!e has
a minimum of 1?:.?? days and a ma3imum of ?.:? days. *et 'peratin# rofit has a
minimum of 1;
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hain# a minimum of 6.66 days and a ma3imum of ?.;; days8 *et 'peratin# rofit has a
mean a!ue of >.1: 5ith a standard deiation of 2.?2 hain# a minimum of 6.66 and a
ma3imum of ?.;; and %arnin# per share has a mean a!ue of 6.?4 5ith a standard
deiation of 1.16 hain# a minimum of 2.in
days?
+orre!ation -0.35 -0.32 +orre!ation 0.503 0.300
p @a!ue 0.00 0.00
p @a!ue 0.000 0.003
nventory
T!rnover >in
(ays?
+orre!ation 0.21 0.25 +orre!ation 0.077 -0.113
p @a!ue 0.01 0.00 p @a!ue 0.455 0.273Avera'e
Payment
Period >in
days?
+orre!ation 0.13 0.03 +orre!ation -0.186 -0.212
p @a!ue 0.10 0.74 p @a!ue 0.069 0.038Cash
Conversion
Cycle
+orre!ation 0.02 0.13 +orre!ation 0.239 0.055
p @a!ue 0.82 0.10 p @a!ue 0.019 0.593
Tab!e 4.4 sho5s the ,orre!ation bet5een dependent and independent ariab!es in different
se,tors. n +hemi,a! $e,tor8 Aera#e +o!!e,tion eriod has a si#nifi,ant moderate
ne#atie ,orre!ation 5ith *et 'peratin# rofit 6. and %arnin# per $hare 6.. n $u#ar $e,tor8 Aera#e +o!!e,tion eriod has a moderate
ositie ,orre!ation 5ith *et 'peratin# rofit 6.>6< and %arnin# per $hare 6.
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Avera'e
Collection
Period >in
days?
+orre!ation -0.138 -0.041 +orre!ation 0.153 -0.223
p @a!ue 0.063 0.577 p @a!ue 0.124 0.024
nventory
T!rnover >in
(ays?
+orre!ation -0.231 -0.198 +orre!ation -0.057 -0.059
p @a!ue 0.002 0.007 p @a!ue 0.568 0.552Avera'e
Payment
Period >in
days?
+orre!ation -0.157 -0.062 +orre!ation 0.195 -0.183
p @a!ue 0.033 0.404 p @a!ue 0.049 0.065
Cash
Conversion
Cycle
+orre!ation -0.017 -0.064 +orre!ation -0.026 -0.081
p @a!ue 0.818 0.390 p @a!ue 0.791 0.417
Correlation bet%een Cash Conversion Cycle and the
Firms Performance
Correlation bet%een Cash Conversion Cycle and
the Firms Performance
Te=tile /ectorin
days?
+orre!ation -0.277 -0.152 +orre!ation -0.4901 -0.2418
p @a!ue 0.000 0.000 p @a!ue 0.0000 0.0241
Cash
Conversion
Cycle
+orre!ation 0.483 0.165 +orre!ation -0.4692 -0.2078
p @a!ue 0.000 0.000 p @a!ue 0.0000 0.0535
n %n#ineerin# $e,tor8 nentory Turnoer has a si#nifi,ant moderate ne#atie ,orre!ation
5ith *et 'peratin# rofit 6.2.
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n Te3ti!e $e,tor8 Aera#e +o!!e,tion eriod has a si#nifi,ant moderate positie
,orre!ation 5ith *et 'peratin# rofit 6.2128
hi!e +ash +onersion +y,!e has a moderate positie ,orre!ation 5ith *et 'peratin#
rofit 6.4?< and 5ea positie ,orre!ation 5ith %arnin# per $hare 6.1:>. n +ement
$e,tor a!! ariab!es are si#nifi,ant!y ,orre!ated 5ith ea,h other. Aera#e +o!!e,tion
eriod has a si#nifi,ant moderate ne#atie ,orre!ation 5ith *et 'peratin# rofit 6.
and %arnin# per $hare 6.
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. 0.277815 0.245879 0.09951 0.077181
8i'enval!es of nv>8?9
B Can$s >+- Can$s?
8i'enval!e (ifference Pro)ortion C!m!lative0.7051 0.6215 0.894 0.894
0.0836 0.106 1
Test of 9@: The canonical correlations in the c!rrent ro% and all that follo% are Dero
#ikelihood
$atio
A))ro=imate
F ;al!e
0.54120849 7.28 8 162 .1 sho5s the ,orre!ation bet5een the dependent and independent ariab!es
5hi,h ,an ary from 1 (stron#!y ne#atie ,orre!ation) to P1 (stron#!y ositie
,orre!ation) represented throu#h the measure of ,anoni,a! ,orre!ation. n +hemi,a! se,tor8
the first dependent ariab!e8 'peratin# rofit is moderate!y ,orre!ated 5ith independent
ariab!es 6.:4. Ad=usted ,anoni,a! ,orre!ation sho5s the more a,,urate
a!ue ,orre!ation bet5een the dependent and independent ariab!es 5hi,h is 6.:22:1;
and 6.24>?;9 after dedu,tin# the standard error. The tab!e a!so sho5s %i#en a!ues8
5hi,h represents arian,e ,aptured by the ,omponents hain# a a!ue of 6.;6>1 and
6.6?412 5ith an a!ue of ;.2? hain# a
si#nifi,ant a!ue 6.6661 and 6.922? 5ith an a!ue of 2.29 hain# a ,!ose si#nifi,ant
a!ue of 6.6?4?8 5hi,h sho5s that 5e re=e,t our nu!! hypothesis.
Table 2"+ !ltivariate /tatistics and F A))ro=imation
/B. B.5 Wilks
#ambda
0.5412
08 7.28 8 162
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9otellin'-
#a%ley
Trace
0.7887
44 7.93 8 113.41
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/HGA$ /8CT3$
Table 25. Canonical Correlation Analysis >Test of 9@?
Canonical
Correlation
Ad4!sted
Canonical
Correlation
A))ro=imate
/tandard 8rror
/!ared
Canonical
Correlation
+ 0.52699 0.505225 0.074105 0.277718
. 0.21696 0.201746 0.097768 0.047071
8i'enval!es of nv>8?9
B Can$s >+- Can$s?
8i'enval!e (ifference Pro)ortion C!m!lative
0.3845 0.3351 0.8862 0.8862
0.0494 0.1138 1
Test of 9@: The canonical correlations in the c!rrent ro% and all that follo% are Dero
#ikelihood $atio A))ro=imate
F ;al!e
0.68828316 6.23 6 182
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Pillais Trace
0.324789
44 5.95 6 184
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0.92281882 2.29 3 82 0.0848
n %n#ineerin# se,tor8 'peratin# rofit is moderate!y ,orre!ated 5ith independent
ariab!es 6.:4. Ad=usted ,anoni,a! ,orre!ation bet5een the dependent
and independent ariab!es in %n#ineerin# se,tor are 6.:22:1; and 6.24>?;9 after
dedu,tin# the standard error. The %i#en a!ues of the ,omponents are 6.;6>1 and 6.6?4126 5ith an a!ue of ;.2? hain# a si#nifi,ant
a!ue 6.6661 and 6.922?1 5ith an a!ue of 2.29 hain# a!ue of 6.6?4?8 5hi,h
sho5s that the resu!ts are si#nifi,ant and 5e re=e,t our nu!! hypothesis.
Table 2"0 !ltivariate /tatistics and F A))ro=imation
/B. B.5 Wilks #ambda
0.541208
49 7.28 8 162
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Table 252 Canonical Correlation Analysis >Test of 9@?
Canonical
Correlation
Ad4!sted
Canonical
Correlation
A))ro=imate
/tandard 8rror
/!ared
Canonical
Correlation
+ 0.36637 0.331858 0.085724 0.134227
. 0.090874 0.043891 0.098197 0.008258
8i'enval!es of nv>8?9
B Can$s >+- Can$s?
8i'enval!e (ifference Pro)ortion C!m!lative
0.155 0.1467 0.949 0.949
0.0083 0.051 1
Test of 9@: The canonical correlations in the c!rrent ro% and all that follo% are Dero
#ikelihood $atio A))ro=imate
F ;al!e
0.85862353 2.59 6 196 0.0196
0.99174192 0.41 2 99 0.6633
n %ner#y se,tor8 'peratin# rofit is 5ea!y ,orre!ated 5ith independent ariab!es
6.?:2< 5ith an a!ue of 2.>9 hain# a si#nifi,ant a!ue
6.619: and 6.991;4192 5ith an a!ue of 6.41 hain# a!ue of 6.::
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Wilks #ambda
0.8586235
3 2.59 6 196 0.0196
Pillais Trace
0.1424849
3 2.53 6 198 0.022
9otellin'-#a%ley
Trace
0.1633638
1 2.66 6 128.9 0.0184$oys Greatest
$oot
0.1550369
7 5.12 3 99 0.0025
n %ner#y se,tor8 i!s7 -ambda has a a!ue of 6.?>?:2< 5ith a!ue of 2.>9 hain#
a!ue of 6.619:8 i!!ai7s Tra,e has a a!ue of 6.1424?49< 5ith the a!ue of 2.>QQ 1 6.24QQ
p@a!ue 6.66 6.66 6.66
Cash
Conversion
Cycle
+orre!ation 6.6< 6.?2QQ 6.24QQ 1
p@a!ue 6.;1 6.66 6.66 QQ+orre!ation is si#nifi,ant at the 6.61 !ee! (2tai!ed).
Q+orre!ation is si#nifi,ant at the 6.6> !ee! (2tai!ed).
Correlations
/!'ar /ector
Avera'e
Collection
Period in
(ays
nventory
T!rnover
in (ays
Avera'e
Payment
Period in
(ays
Cash
Conversion
Cycle
Avera'e
Collection
Period in(ays
+orre!ation 1 6.12 6.6? 6.2?QQ
p@a!ue 6.2> 6.44 6.61
nventory
T!rnover in
(ays
+orre!ation 6.12 1 6.21Q 6.?1QQ
p@a!ue 6.2> 6.64 6.66Avera'e
Payment
Period in
(ays
+orre!ation 6.6? 6.21Q 1 6.
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8n'ineerin'
/ector
Avera'e
Collection
Period in
(ays
nventory
T!rnover
in (ays
Avera'e
Payment
Period in
(ays
Cash
Conversion
Cycle
Avera'e
Collection
Period in
(ays
+orre!ation 1 6.6< 6.?1QQ 6.4QQ 6.2:QQ 6.49QQ 1.666
p@a!ue 6.666 6.669 6.666
QQ+orre!ation is si#nifi,ant at the 6.61 !ee! (2tai!ed).
Q+orre!ation is si#nifi,ant at the 6.6> !ee! (2tai!ed).
Correlations
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Te=tile /ector
Avera'e
Collection
Period in
(ays
nventory
T!rnover
in (ays
Avera'e
Payment
Period in
(ays
Cash
Conversion
Cycle
Avera'e
Collection
Period in
(ays
+orre!ation 1 6.42QQ 6.64 6.>2QQ
p@a!ue 6.66 6.;QQ
p@a!ue 6.66 6.66 6.66
Avera'e
Payment
Period in
(ays
+orre!ation 6.64 6.24QQ 1 6.;QQ 6. !ee! (2tai!ed).
Correlations
Cement /ector
Avera'e
Collection
Period in
(ays
nventory
T!rnover
in (ays
Avera'e
Payment
Period in
(ays
Cash
Conversion
Cycle
Avera'e
CollectionPeriod in
(ays
+orre!ation 1 6.QQ
p@a!ue 6.66 6.66 6.66
nventory
T!rnover in
(ays
+orre!ation 6.?QQ 6.QQ
p@a!ue 6.66 6.66 6.66Avera'e
Payment
Period in
(ays
+orre!ation 6.?QQ 1 6.1?
p@a!ue 6.66 6.66 6.16
Cash
ConversionCycle
+orre!ation 6.>>2QQ 6.4QQ 6.1;; 1.666
p@a!ue 6.666 6.661 6.161
QQ+orre!ation is si#nifi,ant at the 6.61 !ee! (2tai!ed).
Q+orre!ation is si#nifi,ant at the 6.6> !ee! (2tai!ed).
Table 20: Correlation amon' the Firms Performance ;ariables
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Correlations Amon' the Firms Performance ;ariables
Chemical /ector>1:QQ >1:QQ 1 8arnin'Per /hare
+orre!ation 6.:62QQ 1
pa!ue 6.6666 pa!ue 6.666
8n'ineerin'
/ector
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Table 26 >a?: $a% Canonical Coefficients for the Cash Conversion Cycle ;ariables
$a% Canonical Coefficients for the Cash Conversion Cycle ;ariables
Chemical
/ectorCCC+ CCC.
/!'ar
/ectorCCC+ CCC.
Avera'e Collection
Period in (ays
-0.05157
46
-0.78756
74
Avera'eCollection
Period in (ays
0.078344
229
0.0018440
5
nventory
T!rnover >in (ays?
-
0.30462
27
-
0.46961
41
nventory
T!rnover >in
(ays?
0.001011
654
0.0098084
41
Avera'e Payment
Period >in (ays?
1.08861
30
0.50603
52
Avera'e
Payment Period
>in (ays?
-
0.005602
63
0.0068464
34
Cash Conversion
Cycle
0.69636
63
0.63024
36
Cash
Conversion
Cycle 0 0
8n'ineerin'
/ectorCCC+ CCC.
8ner'y
/ectorCCC+ CCC.
Avera'e Collection
Period in (ays
0.00292
97
0.00592
3
Avera'e
Collection
Period in (ays
0.010688
352
-
0.0073131
5
nventory
T!rnover >in (ays?
0.00920
61
-
0.00578
8
nventory
T!rnover >in
(ays?
0.002755
33
-
0.0387041
2
Avera'e Payment
Period >in (ays?
0.00101
37
0.00177
79
Avera'e
Payment Period
>in (ays?
0.012493
682
0.0093786
7
Cash Conversion
Cycle 0 0
Cash
Conversion
Cycle 0 0
Te=tile
/ectorCCC+ CCC.
Cement
/ectorCCC+ CCC.
Avera'e Collection
Period in (ays
-
0.01560
7
0.40061
1
Avera'e
Collection
Period in (ays
-
0.051574
62
-
0.7875673
6
nventory
T!rnover >in (ays?
0.35135
2
0.24836
28
nventory
T!rnover >in
(ays?
-
0.304622
75
-
0.4696140
7
Avera'e Payment
Period >in (ays?
-
0.32699
5
0.64185
38
Avera'e
Payment Period
>in (ays?
1.088612
97
0.5060351
52
Cash Conversion
Cycle
0.41354
22
-
0.01993
2
Cash
Conversion
Cycle
0.696366
316
0.6302436
13
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Table 26 >b?: $a% Canonical Coefficients for the Firms
Performance ;ariables
$a% Canonical Coefficients for the Firms Performance ;ariables
Chemical
/ectorFP+ FP.
/!'ar
/ectorFP+ FP.
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Table 27 >a?: /tandardiDed Canonical Coefficients for Cash Conversion
Cycle ;ariables
/tandardiDed Canonical Coefficients for the Cash Conversion Cycle ;ariables
Chemical
/ectorCCC+ CCC. /!'ar /ector CCC+ CCC.
Avera'e Collection
Period in (ays
-
0.0752
-
1.1479
Avera'e
Collection Period
in (ays
0.9197 0.0216
nventory T!rnover
>in (ays?
-
0.2672 -0.412
nventory
T!rnover >in
(ays?
0.0879 0.8521
Avera'e Payment
Period >in (ays? 0.8131 0.378
Avera'e Payment
Period >in (ays?
-
0.3055 0.3733
Cash Conversion
Cycle 0.7274 0.6583
Cash Conversion
Cycle 0 0
8n'ineerin'/ector
CCC+ CCC. 8ner'y/ector
CCC+ CCC.
Avera'e Collection
Period in (ays 0.282 0.5701
Avera'e
Collection Period
in (ays
0.6389 -
0.4371
nventory T!rnover
>in (ays? 0.8478 -0.533
nventory
T!rnover >in
(ays?
0.0622 -
0.8733
Avera'e Payment
Period >in (ays? 0.2064 0.362
Avera'e Payment
Period >in (ays? 0.6206 0.4659
Cash Conversion
Cycle 0 0
Cash Conversion
Cycle 0 0
Te=tile /ector CCC+ CCC.Cement
/ectorCCC+ CCC.
Avera'e Collection
Period in (ays
-
0.0243 0.623
Avera'e
Collection Period
in (ays
-
0.0752
-
1.1479
nventory T!rnover
>in (ays? 0.2567 0.1815
nventory
T!rnover >in
(ays?
-
0.2672 -0.412
Avera'e Payment
Period >in (ays?
-
0.3257 0.6392
Avera'e Payment
Period >in (ays? 0.8131 0.378
Cash Conversion
Cycle 0.7098
-
0.0342
Cash Conversion
Cycle 0.7274 0.6583
Table 27 >b?: /tandardiDed Canonical Coefficients for the
Firms Performance ;ariables
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/tandardiDed Canonical Coefficients for the Firms Performance
;ariables
Chemical
/ectorFP+ FP.
/!'ar
/ectorFP+ FP.
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Table 2: Correlation bet%een the Cash Conversion Cycle ;ariables
and their Canonical ;ariables
Correlations et%een the Cash Conversion Cycle ;ariables and Their
Canonical ;ariables
Chemical
/ector CCC+ CCC. /!'ar /ector CCC+ CCC.Avera'e
Collection Period
in (ays
0.51
84
-
0.8079
Avera'e
Collection
Period in (ays
0.95
46
0.092
7
nventory
T!rnover >in
(ays?
0.42
88
-
0.4104
nventory
T!rnover >in
(ays?
0.13
4
0.931
5
Avera'e Payment
Period >in (ays?
0.76
08
-
0.1615
Avera'e
Payment Period
>in (ays?
-
0.36
1
0.547
1
Cash ConversionCycle
0.7355
-0.0537
Cash
ConversionCycle
0.4471
0.5485
8n'ineerin'
/ector CCC+ CCC.
8ner'y
/ector CCC+ CCC.Avera'e
Collection Period
in (ays
0.47
7 0.8455
Avera'e
Collection
Period in (ays
0.79
7
-
0.251
nventory
T!rnover >in
(ays?
0.88
61
-
0.4634
nventory
T!rnover >in
(ays?
0.02
18
-
0.837
Avera'e PaymentPeriod >in (ays?
0.5536 0.7486
Avera'e
Payment Period>in (ays?
0.7887
0.3425
Cash Conversion
Cycle
0.09
79
-
0.7531
Cash
Conversion
Cycle
0.12
95
-
0.737
Te=tile /ectorCCC+ CCC.
Cement
/ector CCC+ CCC.Avera'e
Collection Period
in (ays
0.43
98 0.7066
Avera'e
Collection
Period in (ays
0.51
84
-
0.808
nventory
T!rnover >in(ays?
0.5734 0.5738
nventory
T!rnover >in(ays?
0.4288 -0.41
Avera'e Payment
Period >in (ays? -0.54 0.7207
Avera'e
Payment Period
>in (ays?
0.76
08
-
0.162
Cash Conversion
Cycle
0.96
9 0.1473
Cash
Conversion
Cycle
0.73
55
-
0.054
-
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Cash Conversion Cycle & Firms Performance of Pakistani Firms
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Table 2+@: Correlation bet%een the Firms Performance ;ariables
the their Canonical ;ariables
Correlations et%een the Firms Performance ;ariables and Their
Canonical ;ariables
Chemical/ector
FP+ FP. /!'ar/ector
FP+ FP.
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,orre!ation 5ith 2 in a!! se,tors. %arnin# per share has a moderate or stron# ne#atie or
positie ,orre!ation 5ith both 1 and 2 in a!! the se,tors.
Table 2++: Correlations bet%een the Cash Conversion Cycle ;ariables and
the Canonical ;ariables of the Firms Performance ;ariablesCorrelations et%een the Cash Conversion Cycle ;ariables and the Canonical
;ariables of the Firms Performance ;ariables
Chemical
/ectorFP+ FP. /!'ar /ector FP+ FP.
Avera'e Collection
Period in (ays
0.333
4
-
0.224
4
Avera'e Collection
Period in (ays
0.503
1
0.020
1
nventory
T!rnover >in (ays?
0.275
8 -0.114
nventory
T!rnover >in (ays?
0.070
6
0.202
1
Avera'e Payment
Period >in (ays?
0.489
2
-0.044
9
Avera'e Payment
Period >in (ays?
-0.190
3
0.118
7
Cash Conversion
Cycle 0.473
-
0.014
9
Cash Conversion
Cycle
0.235
6 0.119
8n'ineerin'
/ectorFP+ FP. 8ner'y /ector FP+ FP.
Avera'e Collection
Period in (ays
0.128
7
0.071
9
Avera'e Collection
Period in (ays 0.292
-
0.022
8
nventory
T!rnover >in (ays?
0.239
1
-0.039
4
nventory
T!rnover >in (ays? 0.008 -0.076
Avera'e Payment
Period >in (ays?
0.149
4
0.063
6
Avera'e Payment
Period >in (ays? 0.289
0.031
1
Cash Conversion
Cycle
0.026
4 -0.064
Cash Conversion
Cycle
0.047
5 -0.067
Te=tile /ector FP+ FP. Cement /ector FP+ FP.
Avera'e Collection
Period in (ays
0.221
5
0.056
5
Avera'e Collection
Period in (ays
0.333
4
-
0.224
4
nventory
T!rnover >in (ays?
0.288
9
0.045
9
nventory
T!rnover >in (ays?
0.275
8 -0.114
Avera'e Payment
Period >in (ays?
-
0.271
8
0.057
6
Avera'e Payment
Period >in (ays?
0.489
2
-
0.044
9
Cash Conversion
Cycle
0.488
1
0.011
8
Cash Conversion
Cycle 0.473
-
0.014
9
-
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Aboe Tab!e 4.11 sho5s the ,orre!ation bet5een ea,h ariab!e in one #roup and the
,anoni,a! ariates of the other. &esu!ts are sho5in# that the ,orre!ation bet5een +ash
+onersion +y,!e ariab!es and firm7s performan,e ariab!es is 5ea or moderate in a!!
se,tors8 5hi,h are either positie or ne#atie.
Table 2+.: Correlations bet%een the Firms Performance;ariables and the Canonical ;ariables of the Cash Conversion
Cycle ;ariables
Correlations et%een the Firms Performance ;ariables and the
Canonical ;ariables of the Cash Conversion Cycle ;ariables
Chemical
/ector CCC+ CCC./!'ar
/ector CCC+ CCC.
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Cash Conversion Cycle & Firms Performance of Pakistani Firms
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that the ,orre!ation bet5een firm7s performan,e ariab!es and ,anoni,a! ariab!es of +ash
+onersion +y,!e is 5ea or moderate in a!! se,tors8 5hi,h are either positie or
ne#atie.
Cha)ter * 5
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Concl!sion5+ Concl!sion:
The present study ea!uates the impa,t of +ash +onersion +y,!e on se,tor 5ise firm7s
performan,e of manufa,turin# firms !isted in K$% inde3. The impa,t of +ash +onersion
+y,!e has been e3amined in arious manufa,turin# se,tors by usin# +anoni,a! re#ression
on ane! data for the time period of 2664 to 2669.
The ,urrent resu!ts are ,onfirmin# the dimensions of +ash +onersion +y,!e used in past
studies a!on# 5ith ne5 dimensions 5hi,h are ,onsistent 5ith the theory of +ash
+onersion +y,!e. This resear,h is ,onsist of t5o dimensions used in this study8 first is
*et operatin# profit8 5hi,h is used in preious studies8 and a ne5 dimension i.e %arnin#
per share has neer used before.
The resu!t sho5s that a!most in eery se,tor8 Aera#e ,o!!e,tion period in days has a
si#nifi,ant ne#atie re!ationship 5ith *et operatin# profit and %arnin# per share.
nentory turnoer in days has a si#nifi,ant ne#atie re!ationship 5ith *et operatin#
profit and %arnin# per share but in fe5 se,tors8 there is positie re!ation bet5een
nentory turnoer in days and *et operatin# profit8 and a!so 5ith %arnin# per share
5hi,h is insi#nifi,ant and =ustified by the theory. Aera#e payment period has ne#atie
re!ationship 5ith both *et operatin# profit and %arnin# per share 5hi,h is ,onsistent 5ith
the studies of (&ehman et a!8 2616) and (&ehman and *sar8 266;). +ash +onersion
+y,!e is a!so sho5in# the ne#atie re!ationship 5ith *et operatin# profit and %arnin# per
share 5hi,h means that if the firm redu,es its +ash +onersion +y,!e than the firm7s
profitabi!ity and performan,e in,reases. The shorter +ash +onersion +y,!e in,reases the
aai!abi!ity of ,ash 5hi,h is benefi,ia! for the firm7s performan,e (Iama! zubairi8 2616).
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Cash Conversion Cycle & Firms Performance of Pakistani Firms
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'era!! resu!t des,ribes that manufa,turin# ,ompanies of different se,tors !isted in K$%
are ery #ood in mana#in# and improin# its +ash +onersion +y,!e for the ma3imum
performan,e and profitabi!ity of the firm8 5hi,h #ies ma3imum output to share ho!ders.
They are optimisti,a!!y uti!izin# their inestment 5ith an a##ressie approa,h to in,rease
their firm7s performan,e and profitabi!ity.
5. Findin's:
n the duration of 26642616 stron# fa,ts are dis,oered on the sub=e,t of firms7
performan,e of a!! the se,tors that are !isted in K$% 5hi,h are stated be!o5/
+- 'n the 5ho!e the manufa,turin# or#anizations are effe,tie!y and effi,ient!y
mana#in# their +ash +onersion +y,!e for utmost profitabi!ity and performan,e
5hi,h ma3imizes the shareho!der7s 5ea!th.
.- Aera#e payment period has ne#atie re!ationship 5ith both *et operatin# profit
and %arnin# per share.
0- The shorter +ash +onersion +y,!e enhan,es the aai!abi!ity of ,ash 5hi,h is
faorab!e for the firm7s performan,e.
50 $ecommendations:
1 A!! the firms shou!d mana#e inentory in order to aert the sto, of inentory
5hi,h 5i!! !ead to the effe,tie resu!ts of inestment and some standards and
!ee!s shou!d be ensured 5hi,h 5i!! aoid the oer sto,in# of inentory.
2 There are many measures that firms ,an opt for in order to mana#e the inentory
su,h as =ust in time.
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Cash Conversion Cycle & Firms Performance of Pakistani Firms
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1 The %ffe,t of +ash +onersion +y,!e shou!d a!so be ,he,ed on the other
performan,e indi,ators in order to ana!yze the ,omprehensie effe,ts.
2 The effe,t of +ash +onersion +y,!e shou!d a!so be ,he,ed on the
performan,e indi,ators of the finan,ia! institutions !isted in K$%.
$eferences
Abdu! &ehman Mohammad *asr8 Mar,h 266;8 Sorin# +apita! Mana#ement and
rofitabi!ity +ase of aistani irmsU8nternationa! &eie5 of Business
&esear,h apers8 @o!.< *o.18 p.2;9 62??; ssue 248
http/OO555.euro=ourna!s.,omOfinan,e.htm.
Aziz A. -ooman8 26648 SDoes Jed#in# n,rease irm @a!ueC/ %iden,e from 'i! and
Has rodu,in# irmsU8 http/OO555.andre5.,mu.eduOuserOa!
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Cash Conversion Cycle & Firms Performance of Pakistani Firms
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Iames A. Hentry8 &. @aidyanathan8 Jei ai -ee8 19968 SA ei#hted +ash +onersion
+y,!eU8 @o!.198 *o.18 pp.96998 http/OO555.=stor.or#Ostab!eO
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Cash Conversion Cycle & Firms Performance of Pakistani Firms
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Abdu! &ehman8 Ta!at Afza8 Abdu! Layyum8 Mehmood Ahmed Bod!a8 2616 Sorin#
+apita! Mana#ement and +orporate erforman,e of Manufa,turin# $e,tor in
aistanU8 nternationa! &esear,h Iourna! of inan,e and %,onomi,s8 $$* 14>6
2??; ssue 4; (2616)8 %uroIourna!s ub!ishin#8 n,. 26168
http/OO555.euro=ourna!s.,omOfinan,e.htm.
Kesseen ada,hi8 266:8 STrends in orin# +apita! Mana#ement and its mpa,t on
irms7 erforman,e/ An Ana!ysis of Mauritian $ma!! Manufa,turin# irmsU8
nternationa! &eie5 of Business &esear,h apers8 @o.2 *o. 2. ',tober 266:8 p.
4> >?.
Daid M.Muthaa8 26698 SThe inf!uen,e of orin# +apita! Mana#ement ,omponents
on ,orporate profitabi!ity/ A surey on Kenyan !isted irmsU8 a,u!ty of
+ommer,e8 $trathmore niersity8 992?8 662668 *airobi8 &esear,h Iourna! of
Business Mana#ement8 26698 A,ademi, =ourna!s n,.
B.A &an=ith Appuhami8 266?8 SThe impa,t of firms7 +apita! e3penditures on orin#
+apita! Mana#ement/ An %mpiri,a! study a,ross ndustries in Thai!andU8
Department of A,,ountin#8 niersity of $ri Iaye5ardenepura8 nternationa!Mana#ement &eie58 @o!.4 *o. 1 266?.
o!f#an# Drobetz and Matthias +. Hrnin#era8b8 266:8 S+orporate +ash Jo!din#s/
%iden,e rom A Different nstitutiona! $ettin#U8
http/OO55z.unibas.,hOfi!eadminO55zOredationOorumODis,ussion0apersO266:O
Manue! -. Iose8 +aro! -an,aster8 and Ierry -. $teens8 199:8 S+orporate &eturn and
+ash +onersion +y,!eU8 Iourna! of %,onomi,s and inan,e8 @o!ume 268 *umber
18 a#es
-
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Cash Conversion Cycle & Firms Performance of Pakistani Firms
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J. Iama! Fubairi and Abdu! &ashid8 266>8 S!eera#e8 size of firm and profitabi!ity/ The
,ase of aistan7s automobi!e industryU8 Department of %,onomi,s inan,e8
nstitute of Business Mana#ement (oBM).