Cash conversion cycle and its relationship with profitability as a cash management tool in companies: An application on companies trading in Borsa Istanbul

Abstract

This study examines the relationship between companies’ cash cycle and profitability ratios. For this purpose, 30 companies traded in Borsa Istanbul with the highest net profit were selected, and the data obtained were subjected to panel data analysis. In the study, statistically significant, positive and negative relationships were found between the explanatory variables and the dependent variables of ROA and ROE. There are statistically significant and negative relationships between the explanatory variables of CCC, leverage and the dependent variable of ROA, as expected. Asset turnover ratio and firm size positively and significantly affect the ROA. Asset turnover positively and significantly affects the return on equity. The short-term debt repayment period is statistically effect the return on assets but the other factors used in calculating the CCC do not have any effect.

Keywords

• cash conversion cycle
• asset profitability
• equity profitability