The Investigation of Relationship between Cash Conversion Cycle and Liquidity Ratios in Companies Listed on Tehran Stock Exchange
Subject Areas : Industrial ManagementZohreh Hajiha 1 , Fereshteh Feizabadi 2
1 - Academic Member of Islamic Azad University, East Tehran Branch (Ghyam Dasht)
2 - M.A Student of Accounting, Islamic Azad University, Islamshahr Branch
Keywords:
Abstract :
The main objective of this research is to investigate the relationship between cash conversion cycle and liquidity ratios in Iranian companies' context. The study indicates that there is a positive correlation between cash conversion cycle and quick and current ratios. Cash conversion cycle can be defined as a technique to evaluate the working capital indicating the average of liquidity situation of a company. Therefore, the statistical population of companies listed on Tehran Stock Exchange (TSE) was examined in this research. Using randomly sampling, 180 companies were selected as the research sample. The research hypotheses were tested by correlation and regression methods. The findings demonstrated a positive strong significant correlation between cash conversion cycle and quick ratio; however, there is no significant correlation between cash conversion cycle and current ratio. There is, also, a negative significant correlation between cash conversion cycle and inventory conversion period. These results imply that quick ratio is a strong indicator of company liquidity; nonetheless, inventory has a negative effect on liquidity.
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