Effect Of Cash Conversion Cycle On The Financial Performance Of Quoted Companies In Nigeria (A Study Of Premier Paints Plc, Ogun State. (2008-2017)

ABSTRACT

Cash conversion cycle is a concept that is receiving serious attention al over the world especially with the current financial situations and the state of i he world  economy. The concern of business owners and managers all over the world is to devise a strategy of managing their day to day operations in order to rivet their obligations as they fall due and increase profitability and shareholder's wealth. Cash conversion cycle, in most cases, are considered from the perspective of working capital management as most of the indices used for measuring corporate liquidity are a function of the components of working capital. The purpose of this rapper is to investigate the relation between a firm's cash conversion cycle and its profitability. The study examined the effect of cash conversion cycle on the financial performance of quoted companies in Nigeria, focused of Premier Paints Plc., a major manufacturer and supplier of paints in Nigeria and in Africa, for the period of 2008-20 17. Cash conversion cycle, accounts receivable ratio, accounts payable ratio, inventory conversion ratio and, profit after tax are the variables studied in this study, data were sourced from the annual reports of the company under study. Generalized Least square multiple regression analytical tool was used to test the Hypotieses, the Ex-post factor research design was employed. The findings showed that, Inventory ratio and Accounts receivable ratio had significant and positive effect on firms profitability, accounts payable ratio and Cash conversion cycle had positive and significant effect on firms' profit after tax. The results of this study showed that Profit after Tax (PAT) is positively affected by cash conversion cycle (poxied by accounts receivable ratio, inventory conversion ratio and accounts payable ratio). The study also revealed that there is a very high relationship between cash conversion cycle (proxied by accounts receivable ratio, inventory conversion ratio and accounts payable ratio) and the dependent variable financial performance proxy by Profit after Tax (PAT).