The Impact of Cash Conversion Cycle on Services Firms’ Liquidity: An Empirical Study Based on Jordanian Data

Abstract

Depending on (Warrad et al., 2015) study that represented the impact of turnover ratios on Jordanian services sectors' performance, which revealed adverse results in comparison with other previous studies on the same sector; the difference, was explained by the operating costs as an explanatory item. The researcher try to investigate again whether the distortion in the operating costs during the period from 2009 to 2012 which resulting from the excess of the increase in operating costs over the increase in revenues in the Jordanian services firms will make differences in the results in the current study from the results in the previous studies. The current study aims to study the impact of cash conversion cycle on the liquidity of Jordanian services firms that expressed by current ratio and quick ratio during the period from 2009 to 2012. The results showed that there is no significant impact of cash conversion cycle on Jordanian services firms' liquidity, also, there is no significant impact of cash conversion cycle on Jordanian services firms' current ratio, finally there is no significant impact of cash conversion cycle on Jordanian services firms' quick ratio, which prove the previous discussion, because of that The researcher recommends services firms' management to apply a reduction cost strategy to restore the harmony between revenues and operating cost.