Cash Conversion Cycle and Firm’s Profitability: An Empirical Analysis on a Sample of 4,226 Manufacturing SMEs of Italy

Abstract

The aim of this paper is to verify the impact and all the influences of the cash conversion cycle on the profitability of firms. Using data from an extensive sample of Italian manufacturing firms (4,226 Italian SMEs), the present study is concerned about evaluating how cash conversion cycle affects the profitability. Results showed that average receivables period is having significantly positive association with profitability indicating that it is not necessary that always the moral of the story must be: lesser the cash conversion cycle, greater the profitability. The study takes Ebitda on net sales as measures of profitability to represent dependent variables.