Cash Conversion Cycle and Profitability of Textile Companies: Evidences from India
Ashvin R. Dave1, Ashwin Parwani2, Tejas Dave3, Ashish Joshi4
1Dr. Ashvin R. Dave, Professor, Finance, SLS-PDPU, Gandhinagar (Gujarat), India.
2Mr. Ashwin Parwani, Visiting Scholar, SLS-PDPU, Gandhinagar (Gujarat), India.
3Dr. Tejas Dave, Associate Professor, SLS-PDPU, Gandhinagar (Gujarat), India.
4Dr. Ashish Joshi, Associate Professor, SLS-PDPU, Gandhinagar (Gujarat), India.
Manuscript received on 15 September 2019 | Revised Manuscript received on 24 September 2019 | Manuscript Published on 10 October 2019 | PP: 1098-1102 | Volume-8 Issue-6S2, August 2019 | Retrieval Number: F13250886S219/19©BEIESP | DOI: 10.35940/ijeat.F1325.0886S219
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Abstract: Cash Conversion cycle is considered to be a useful measure to gauge the efficiency with which working capital of an enterprise is managed. In this research paper an attempt has been made to examine the relationship cash conversion cycle has with return on assets representing the measure of profitability and the extent to which it exerts its influence on the profitability. Size of the firm represented as log of sales and Financial Debt represented as total debt to total assets ratio are taken as control variables. We have considered only Indian textile companies listed on Indian stock exchanges. The study covers the period of nine years. The data was analysed using various statistical techniques including multiple regression analysis. F-test, auto correlation test using Durbin Watson Statistics and multi co linearity test using matrix of coefficients of correlation and variance inflation statistics were carried out to enhance the reliability of the results so obtained. The study revealed that both cash conversion cycle and size of the firm have strong and very significant negative association with profitability. The firms have to pay attention to ensure that length of cash conversion cycle and size of the firm remain optimum. The debt ratio was found to have insignificant negative association with profitability of the firm. The results of this research will provide insight to academicians and industrial experts for better decisions.
Keywords: Cash Conversion Cycle, Return on Assets, Textile. India, JEL Classification G 30, G31.
Scope of the Article: Classification