THE RELATIONSHIP BETWEEN CASH GAP AND PROFITABILTY: AN EMPIRICAL STUDY FROM TURKEY

Yıl 2018, Cilt: 7 Sayı: 3, 288 - 294, 30.09.2018

Bengu Vuran , Burcu Adiloglu

Öz

Purpose- Cash gap or cash conversion cycle 
refers to the time interval between the date when a company pays cash
out for the inventory it purchases and the date it receives cash from customers
for the same inventory. That interval must be
financed.  Management of cash
conversion cycle is vital issue in corporate financial management since it
directly affects the profitability of the firms. The
purpose of this study is to analyze the relationship of cash gap and
corporate profitability.

Methodology- The data set includes all manufacturing firms listed
in Borsa Istanbul (BIST) for the year 2017. The financial sector firms are
excluded since their financial statements have different aspects. Regression and correlation analyses
are conducted to examine the relationship between the cash gap and
profitability.

Findings- The results of the study evaluate how cash conversion cycle affects the
profitability and show if there is a statistical significance between
profitability the cash conversion cycle.

Conclusion- Managers of the companies that handle the cash conversion cycle
correctly and keep each different component (accounts receivables, accounts
payables, inventory) to an optimum level can create profits and seems
successful from the views of investors. 
The study also contributes to the literature on the issue of
relationship between cash gap and the firm’s profitability.

Anahtar Kelimeler

Cash gap, working capital management, profitability, Borsa Istanbul, cash cycle

Kaynakça

• Akınyomi, J. O. (2014). Effect of cash management on profitability of Nigeian manufacturing firms. International Journal of Marketing and Technology, Vol.4, Issue 1, January 2014, 129-140.
• Ebben, J. J., Johnson, A. C. (2011). Cash conversion cycle management in small firms: relationships with liquidity, invested capital, and firm performance. Journal of Small Business and Entrepreneurship, 24(3): 381-396.
• Lazaridis, I., Tryfonidis, D. (2006). Relationship between working capital management and profitability of listed companies in the Athens stock exchange., http://ssrn.com/abstract=931591
• Garcia-T., P. J., Martinez-Solano, P. (2007). Effects of working capital management on SME profitability. International Journal of Managerial Finance, Vol. 3 No. 2, pp. 164-177.
• Gill, A., Biger, N., Mathur, N. (2010). The relationship between working capital management and profitability: evidence from the United States. Business and economics journal, 10(1), 1-9.
• Mathuva, D. (2009). The influence of working capital management components on corporate profitability: a survey on Kenyan listed firms. Research Journal of Business Management, Vol 3: pp:1-11.
• Muscettola, M. (2014). Cash conversion cycle and firms’s profitability: an emprical analysis on a sample of 4226 manufacturing SMEs of Italy. International Journal of Business and Management, Vol.9,No:5, 2014, 25-35.
• Napompech, K. (2012). Effects of working capital management on the profitability of Thai listed firms. International Journal of Trade, Economics and Finance, 3(3), 227.
• Uwuigbe, O., Uwuigbe, U., Ben-Caleb, E. (2012). Cash management and corporate profitability: a study of selected listed manufacturing firms in Nigeria. Acta Universitatis Danubius: Oeconomica, 8(1).
• Zakari, M., Saidu, S. (2016). The impact of cash conversion cycle on firm profitability: evidence from Nigerian listed telecommunication companies. Journal of Finance and Accounting, 4(6), 342.