Effect of cash conversion cycle on profitability in mtn and globacom

Project Abstract

This study investigates the effect of the cash conversion cycle on the profitability of two major telecommunication companies in Nigeria, MTN and Globacom. The cash conversion cycle is a critical financial metric that measures the time it takes for a company to convert its investment in inventory and other resources into cash flow from sales. A shorter cash conversion cycle indicates that the company is able to generate cash quickly and efficiently, while a longer cycle may indicate inefficiencies in the company's operations. Using financial data from MTN and Globacom, this study analyzes the relationship between the cash conversion cycle and profitability. Profitability is a key indicator of a company's financial health and is crucial for investors and stakeholders. By examining how the cash conversion cycle impacts profitability, this study aims to provide insights into the financial performance of these two telecommunications giants. The findings of this study are expected to contribute to the existing body of knowledge on financial management and performance evaluation in the telecommunications industry. Understanding the relationship between the cash conversion cycle and profitability can help companies identify areas for improvement in their financial operations and enhance their overall profitability. Additionally, the results of this study may have implications for investors, regulators, and other stakeholders who are interested in the financial performance of MTN and Globacom. Overall, this research seeks to shed light on the importance of efficient cash management and its impact on profitability in the telecommunications sector. By focusing on the cash conversion cycle, this study provides a unique perspective on how financial metrics can influence the performance of companies in a competitive industry. The results of this study may have practical implications for managers and decision-makers in MTN and Globacom, as well as other companies in the telecommunications sector, looking to optimize their financial performance and enhance their competitive position in the market.

Project Overview

<p> </p><p><strong>Introduction</strong></p><p>Working capital management is a very important component of corporate finance because it directly affects the liquidity and profitability of the company. The working capital is known as life giving force for any economic unit and its management is considered among the most important function of corporate management. Due to that, every organization whether, profit oriented or not, irrespective of size and nature of business, requires necessary amount of working of working capital (Achchuthan &amp; Kajananthan, 2013). Working capital management is a simple and straight forward mechanism of ensuring the ability of the firm to fund the difference between the short term assets and short term liabilities (Kajananthan &amp; Achchuthan, 2013). It deals with current assets and current liabilities. There are two basic ways to assess the working capital management of firms.</p><p>They are balance sheet concept and studying current assets and current liabilities Concept of Cash Conversion Cycle (CCC). The Cash Conversion cycle measures the number of days between actual cash expenditures on purchase of raw materials and actual cash receipts from the sale of products or services (Eljelly, 2004). Since every corporate organization is extremely concerned about how to sustain and improve profitability, hence they have to keep an eye on the factors affecting the profitability. In this regard, liquidity management having its implications on risks and returns of the corporate organizations cannot be overlooked by these organizations and hence cash conversion cycle being indicator of the liquidity management needs to be explored as to how it may affect the profitability of the corporate units. Today due to changing world’s economy, advancement of technology and increased global competition among the companies, every company is striving to enhance their profits and for that companies are putting every effort to bring their cash conversion cycle at optimum level to increase profitability.</p><br> <br><p></p>