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6. Conclusion

This study conducted on listed companies in the Karachi Stock Exchange, presents the mean values CCC for various industries comparatively. Moreover, the finding indicated a significant negative correlation between the length of CCC and the firm size, in terms of total assets. So the larger firms seem to manage their CCC turnover days efficiently whereas their smaller counterparts happen to be struggling with their cash management issues. This finding is in line with that of Moss and Stine (1993) and cautions the smaller firms to better manage their CCC turnover days.

Interestingly, here appears a significant positive relationship between the length of CCC and the profitability of firms in terms of return on total assets giving a strong indication to the firm managers/owners that longer the CCC turnover in days, lesser capital will be deployed in current assets and eventually there will be more capital investment leading towards a higher profitability of the firm. This rationale is also supported by the concept of optimum liquidity position promulgated by Schilling (1996). The cash conversion cycle in terms of days and profitability in terms of return on equity appears to be negatively correlated with the firm's profitability (-0.131) revealing and supporting the previous research finding that the companies with shorter CCC turnover days are more profitable than the firms with longer CCC. The problem of longer CCC turnover days might be the outcome of longer inventory turnover and accounts receivable turnover in terms of days. The study is one of the unique researches about the subject conducted in Pakistan and also presents industry benchmarks to the firms to evaluate their CCC turnover performance in terms of days. The study has several implications and is supposed to be very beneficial for the industries, academics and analysts, as it describes the cash management performance of the selected sectors and its findings can help in setting some useful benchmarks in the related sectors.

Study Limitations

In this study relatively a sample data has been used relating to the period 2006-2009. Secondly, the future longitudinal research may well focus on the related aspects of liquidity management to gain a deep insight into the determinants and impact of CCC on firm performance at large.

Suggestions for Future Research

Further research could usefully test the points raised in this study across a large representative sample of firms representing a larger set of industries. In particular, to identify the circumstances in which the firms change their attitudes towards particular sources of working capital, and that in the different phases of growth cycle, the longitudinal studies may prove more helpful. Research may also be conducted from the perspective of designing a growth oriented optimal working capital financing policy for firms.
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