Assessment of the effect of cash conversion cycle on the performance of manufacturing firms listed at the Dar es Salaam stock exchange. the case of TBL, TPCC and TCC

The study aimed at assessing the effect of cash conversion cycle on the performance of manufacturing firms listed at the Dar es Salaam Stock Exchange. The study was earned on three manufacturing companies namely Tanzania Breweries Limited, Tanzania Cigarette Company and Tanzania Portland Cement Company Limited for a period of 7 years starting from 2010 to 2016. Secondary source of data from the financial statements of the selected companies was used in calculating components of cash conversion cycle (receivable collection period - RCP, inventory conversion period - ICP and payable deferral period - PDP) and profit of each firm. Regression analysis was used to determine the nature and strength of the relationship between RCP, ICP and PDP versus the performance of a firm. Also the descriptive statistics was used in the analysis stage to establish the length of each variable.

The study findings reveal that cash conversion cycle (CCC) has a positive relationship with the performance of a firm. The individual components of CCC reveal that both payable deferral period and receivable conversion period have a significant positive relationship with performance while the ICP has a negative relation with performance. The descriptive results reveal that RCP, ICP and PDP are 25 days, 177 days and 117 days respectively. These creates a CCC of 85 days for listed manufacturing companies in Tanzania.

The study recommends for manufacturing companies in Tanzania to maintain an appropriate level of cash conversion cycle so as to increase performance. Also companies are advised to maintain inventory management systems and production plan so as to minimize the effects of over stocking or stock outs. Similarly firms are advised to prolong payments to suppliers so as to take advantage of their suppliers financing.