Cash Conversion Cycle Management in Auto Mobile Industry: Relationship with Firm Performance, Leverage, Liquidity and Capital Employed

Abstract

The business entities seek for different tools to maximize the shareholder wealth. The management of cash conversion cycle is one of the tools that play an essential role to generate maximum earnings to business firm. The recent paper is an effort to find out the different determinants that persuade cash cycle in automobile division in Pakistan. This industry provides employment opportunities to more than 192000 people directly and 1200000 indirectly. The data of eleven companies from this sector is analyzed to establish a relationship between profitability, leverage, capital employed, liquidity and cash conversion cycle. The data selected for this purpose ranges between 2008 and 2013. Multiple linear regression model is adopted for results. The outputs confirm that a negative considerable relation exists between return on assets, liquidity and cash cycle, whilst leverage and capital employed present a positive significant association with cash conversion cycle.

Keywords: Cash Conversion Cycle (CCC), Profitability, Liquidity, Leverage (debt) and Capital Employed