Cash Conversion Cycle and Performance of Listed Healthcare Companies on the Nigerian Stock Exchange
Ambe Alfred Neba
Department of Accounting
Gombe State University
Email: nebaa2002@yahoo.co.uk
ABSTRACT
Though wide spread studies show a strong link between cash conversion cycle and financial performance of organisations around the world, there are however, limited studies of such found in developing countries. This study examines the cash conversion cycle and financial performance of listed healthcare companies on the Nigerian Stock Exchange for the period 2012 to 2016, in order to establish the relationship between cash conversion cycle and financial performance. The study used descriptive analysis and the correlation model. The data was obtained from the published financial statements and accounts of firms by Nigerian Stock Exchange. The
Pearson Correlation coefficient was calculated to establish the relationship and a ttest administered to determine the significance of the relationship. Key findings were that there exists a negative relationship between cash conversion cycle and financial performance of healthcare companies listed on the Nigerian Stock Exchange – a negative return of -0.313; that the sectorial correlation coefficient, was -0.1471; and
that the reduction of turnover period can increase financial performance and profitability. This suggests that firms with short cash conversion cycles were likely to perform better than those with long cash conversion cycles. Firms in the sector are therefore encouraged to shorten their cash cycles. Also recommended is that healthcare companies should deliberately and efficiently control cash along their supply chain networks and avoid stockpiling. Key words: Cash Conversion cycle, Inventory Turnover, Average payment Period.
