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A Game Study on Accounts Receivable Financing in Energy Conservation and Environmental Protection Manufacturing Supply Chain under Green Development
Liquidity measurement problems in mining companies.
The ability to manage liquidity is important in any economic conditions. It assumes unique importance during a downturn and depends on management having reliable information on the company’s liquidity level. Static liquidity ratios do not provide such reliableinformation. Their high values result from high inventory levels of extracted raw materials and is not tantamount to excess liquidity.Additional information is offered by the cash cycle and its constituents – Days Inventory Outstanding, Accounts Receivable Days andAccounts Payable Days. Long cash cycles signal a shorter deferral of settlement of suppliers’ bills and a lower liquidity level. To maintain liquidity, companies must maintain higher cash balances in their accounts. Short cycles, on the other hand, may result from latepayment of invoices, which is reflected in long Accounts Payable Days. Some coal companies have very long Accounts Payable Daysand negative cash conversion cycles. This means that some of their non-current assets are financed out of current liabilities.
Determinants of trade credit financing: a dynamic analysis comparing agri-food cooperatives and non-cooperatives
PurposeThe particular characteristics of agri-food cooperatives reduce their ability to access external financial resources. The purpose of this paper is to explore the factors influencing the agri-food cooperatives' trade credit operations by measuring their accounts receivable and comparing the results with agri-food investor-owned firms (IOFs).Design/methodology/approachThe authors apply a partial adjustment model (PAM) estimated using a dynamic panel model with a two-step general method of moments (GMM) estimator to a sample of 11,930 Spanish agri-food cooperatives and IOFs for the period 2011–2018.FindingsThe study concludes that cooperatives and IOFs have an accounts receivable target, which they attempt to achieve rapidly. Cooperatives tend to behave as IOFs do, but they present lower adjustment coefficients. This difference seems to be explained by the unique characteristics of cooperatives which set different economic and social goals, not just profit maximization as IOFs. The findings show differences between the financial and commercial purposes of the cooperatives and IOFs as a result of their internal management policies. Larger cooperatives with access to external financial sources, positive cash flows and operational necessities will grant trade credit.Originality/valueThis study gives interesting implications for cooperative managers and policymakers to help them to understand the strategies behind trade credit policies. Previous empirical studies on the agri-food sector are scarce and focus on IOFs without considering the role of trade credit in European cooperatives.
Value Added from the Perspective of Econophysics
The production, or value added, approach to GDP involves calculating an industry or sector’s output and subtracting its intermediate consumption (the goods and services used to produce the output) to derive its value added. The value added at the macro level depends on business efficiency. It reflects an increase in value that a business creates by undertaking the production process. We assumed that the market creates thousands of vibrating energies, coming from other enterprises, with different frequencies. The purpose of this article is to verify whether the econophysics approach could be successfully used to assess a business from the perspective of the interaction between economic forces. Thus, we propose that the term ‘value added’ be understood as a certain amount of accumulated energy of enterprises that comes from the interaction of basic economic forces and economic vibrating forces of accounting. Using regression models, we show the influence of basic forces, like debt and the stock market, and vibrating ones (i.e., accounts payable, accounts receivable, inventory) on the economic value added by testing US, European, and emerging markets. We confirmed the relevance and appropriateness of the econophysics approach to estimating the economic value added.
Economic diagnostics of accounts receivable and payable in the internal control system of the organization
Subject. This article considers the methodological aspects of economic diagnostics of accounts receivable and payable in the system of internal control of the organization. Objectives. The article aims to highlight the elements of economic diagnostics of the organization's debt in the internal control system and develop methodological approaches to the assessment of accounts receivable and payable. Methods. For the study, we used analysis and synthesis, induction and deduction, as well as comparison, logical generalization, systemic reasoning, and analytical forecasting tools. Results. The article presents an author-developed methodology of economic diagnostics of resources in settlements in the internal control system of the organization. It is based on an algorithm for assessing the dynamics of the turnover of accounts receivable and payable and monitoring their mutual ratio, identifying debt collection reserves, monetizing and forecasting the repayment of current debts. Also, for the operational systematization of information and effective control over the rate of change in accounts receivable and payable, the article offers developed forms of management reporting. Conclusions and Relevance. The developed methodology for economic diagnostics of accounts receivable and payable helps, on the basis of information on the changes in mutual turnover of obligations in the context of counterparties, identify available financial resources, determine possible reserves for debt collection, and make payment predictions. The results of the study can be applied when organizing the internal control system of accounts receivable and payable in the context of assessing the financial condition of the organization.
MANAGEMENT OF RECEIVABLES OF THE ENTERPRISE
The article examined the current state of planning financial obligations and noted the urgency of the problem of the existence of receivables. The urgency of the problem arises due to the presence of a significant share of receivables in the assets of enterprises. The emergence of a problematic issue is the reason for the search for new ways and methods of control over accounts receivable. The organization and methodology for accounting for receivables for goods is shown on the example of TOV "EMSS". We found out that most of the company's income comes from the sale of equipment for the road construction industry, in particular, testing and diagnostic laboratories. The organization of accounting and the main problematic issues of management accounting of receivables in TOV "EMSS" are investigated. The stages of work with contractors are described and the essence of each stage is described in detail. The stage of generating an invoice for payment is considered the moment of the beginning of the receivable to the seller. It has been established that the enterprise is most characterized by current accounts receivable for products, goods and services. At the same time, the company has no bad accounts receivable. The terms of payment for goods and services formed at the enterprise are described. The state and features of management accounting of receivables and their monitoring have been investigated. The main reasons for the origin of accounts receivable in TOV "EMSS" have been clarified. The necessity of work on improving the accounting of receivables and payables has been substantiated. Measures are proposed to reduce the occurrence of accounts receivable and recommendations for improving its information support are developed. The essence of the proposed measures is to automate the information base on accounts payable and receivable of settlement participants; discussion and inclusion in contracts of all obligations between the parties at the stage of concluding the contract; fast fulfillment of obligations for the supply of goods and services; prompt updating of the state of mutual debt, keeping records and reporting of ongoing mutual settlements.
Path Deduction and Countermeasure Analysis of Tunneling Behavior of Major Shareholders of ST Protruly Company
In recent years, China's listed companies make use of the defects of the information disclosure system, using direct or indirect means such as the appropriation of enterprise funds to carry out large tunneling cases are frequently exposed. Based on ST Protruly company, this paper analyzes the path of its major shareholders to implement the hollowed out behavior from the four perspectives: large prepaid accounts, large accounts receivable, large illegal guarantee and huge foreign investment, and then puts forward the measures to restrain the hollowed out behavior of major shareholders of ST Protruly company.
New Era of Accounting System based on Artificial Intelligence (AI)- Triadic- Entry Accounting
Triadic- Entry Accounting is not the term for it, there are considerable benefits in writing deals to an Artificial Intelligence (AI). Important like journal entries are presently recorded in an association’s subledgers (e.g., Accounts Receivable) and general tally, recording deals on an Artificial Intelligence (AI) would give visibility into affiliated deals.
Blockchain Technology Adoption in Supply Chain Finance
Supply Chain Finance (SCF) faces the complex problem of implementing inventory, purchase order and accounts receivable financing automation in terms of transaction data trust and validation. This paper aims to explore how blockchain technology adoption solves the SCF problem using a multi-case method based on the Technological Acceptance Model (TAM). With purposive sampling, 30 cases were selected on the criteria of perceived usefulness and perceived ease of use in solving SCF problems. The results show that trust, validity and distributed ledger transaction data as perceived usefulness are the main drivers of blockchain adoption because it provides solutions to SCF automation problems such as Know Your Customer (KYC), accounting, and transaction settlement. Smart contracts offer easy and fast transactions such as in L/C export processing as perceived ease to use. Of the 30 blockchain projects, 21 offer the usefulness of automated accounts receivable financing, 15 offer easy-to-use purchase order financing and 8 offer easy-to-use inventory financing processes. This study provides the current state of blockchain technology adoption by exploring 30 real application cases in SCF globally. Blockchain advantages provide automation solutions in global supply SCF practices with smart contracts, transparency and security of distributed ledger data feature.
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MANAGEMENT OF ACCOUNTS RECEIVABLES AND ITS EFFECT ON FIRM'S PERFORMANCE: A CASE STUDY OF KOSEL LOGISTICS.
ABSTRACT Accounts receivables refer to a legally enforceable claim for payment from a business by a company for services rendered or for goods supplied to the business. According to Kakuru (2000), when a company renders a service or sells its goods and does not receive cash for it, the company is said to have granted trade credit to clients. The general objective of the study was to identify the effect of management of accounts receivables on the performance of KOSEL Logistics. The study adopted a descriptive cross-sectional survey in which questionnaires were given to a selected sample of respondents from a target population of the management, staff and the customers of KOSEL. Purposive sampling was used to select ten (10) management staff and simple random sampling was used to select forty (40) employees. Also, simple random sampling was adopted in selecting thirty (50) customers of KOSEL. The data collected was processed using SPSS. The results of the study revealed that majority of the customers ask for credit from KOSEL and they do not need to present any collateral to qualify for a credit. Majority of the customers of KOSEL said they have defaulted in the payment of their credit obligations. The findings of the study also shows that KOSEL does not undertake formal credit investigation before granting credit to their customers and customers’ bank reference are not checked. The study revealed that discount payment for early payment of debt increases revenue. The findings of the study revealed that the efficient management of accounts receivable increases sales, reduces cost associated with bad debt, and also increases the profitability of the company. The failure of customers to pay back their credit was found to affect profitability. It was also observed that KOSEL usually faces liquidity problems. The study recommended that KOSEL must have a receivables management policy that will assist in selecting customers for credits since this can help in the selection of customers who will be able to pay their credit on time.
Accounts receivable management directly impacts the profitability of a company. Firstly, the purpose of the empirical part of the study is to analyze accounts receivable and to demonstrate a correlation between the accounts receivable level and profitability expressed in terms of Retun on Assets (ROA) of sample companies. Secondly, the aim of theoretical research is to explore cost and benefits of changes in credit policy, determine the independent variables which have an impact on net savings and establish a relationship among them in order to develop a new mathematical model for calculating net savings following a revision of credit policy. On the basis of research result, a mathematical model for calculating net savings and following a revision of credit policy, has been developed and with this model a company can consider different credit policies as well as changes in credit policy in order to improve its income and profitability and establish a credit policy that results in the greatest net profitability.
International Journal of Academics & Research, IJARKE Journals
This study sought to establish the effect of credit management on financial performance of firms transport firms in Mombasa County. The study‟s objective was to determine the effects of credit management on financial performance of transport firms in Mombasa County. The study targeted 220 staff of transport firms in Mombasa County and the sample size was 140. Data collection was both primary and secondary. Both descriptive and inferential statistics were analyzed for the variables under the study. The study concluded that credit risk control, credit policy, account receivables and credit term have significant effects on financial performance of transport firms in Mombasa County. The study recommended that That transport firms should put in place a robust credit risk control mechanism to safeguard the interest of the company first; That transport firms should be reviewing from time to time its credit policy to be in line with international acceptable standards; That accounts receivables should be well managed, and its audit reports and suggestions implemented; That credit terms should be varied from client to client to increase sales volumes.
A research conduct on topic "IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY OF THE FOOD AND PERSONAL CARE PRODUCTS SECTOR IN PAKISTAN" From above stated purpose, succeeding exact research questions were framed to investigate: 1: “What factors affect a performance of firm’s working capital management?” 2: “How efficiently a firm converting its working capital into ready money?” 3: “How company value enhances through efficient working capital management?” Scope of Study: The scope of study considers the selected Food and Personal care products companies listed in Karachi Stock Exchange of Pakistan. Four companies are selected for the study purpose as random sampling. The selected companies are: 1) Unilever Pakistan Ltd. 2) Nestle Pakistan Ltd. 3) Mitchell’s Foods Farm Pakistan. 4) National Foods Pakistan Ltd. The scope of this study includes the relationship b/w independent variables & dependent variable. Independent Variables are: 1) Average collection Receivable Period. 2) Average Inventory Conversion Period. 3) Average Payment Period. 4) Cash Conversion Cycle. While dependent variable is 1) Return on Asset
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The purpose is to investigate the effect of account receivables and inventory conversion cycle on performance of Manufacturing Firms Listed on Ghana Stock Exchange. The paper adopted cross-sectional study which adopts quantitative research approach. A panel data of six (6) listed Ghanaian manufacturing firms on the Ghana Stock exchange for the periods 2011 to 2020 was used for the study. Data was obtained from the audited financial statements of the firms. Correlation and Ordinary Least Square (OLS) multiple regression s were employed to analyse the data. The finding revealed that there is statistically negative (Beta = -0.201) and significant (P-value = 0.000) effect of account receivables period on return on assets. The study revealed that there is statistically significant negative effect between inventory conversion period and return on asset (Beta = - 0.273, P 0.05). The results indicated that (current ratio, sales growth and cash to sales) had no significant positive effect (Beta = 0.115, P > 0.05), (Beta = 0.071, P > 0.05) on return on asset.
Account Receivables Period , Inventory Conversion Period , Ghana , Return on Asset , Working Capital Management
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Working capital has been documented as organizations life line and their sustainability depends comparatively on how well they manage their working capital (Salawu & Alao, 2014) . Nwankwo (2010) noted that the subject of working capital denotes the capital employed by business organizations for their day to day operation. Conversely, current assets are resources that their economic benefits are accrued within one accounting year and are easily being traded for cash within a year. However, Anand (2002) considered WCM as integral element of corporate finance because it has a direct impact on profitability and liquidity. Similarly, Pinku & Paroma (2018) , emphasize that, efficiency of WCM depends on the balance between liquidity and profitability. Mwangi et al. (2014) and Filbeck (2005) , additionally, argued that, organizations with low liquidity of WC are more likely to be associated with high risk which is deemed to provide higher profit.
Moreover, Mwangi et al. (2014) agreed that organizational achievement is relatively reliant on the capability and efficiency of a financial manager to control meritoriously the components of WC and to upsurge value for shareholders. Kasahun (2020) indicates that WCM should be considered critical as part of companies’ overall corporate strategy. Nevertheless, the net of WCM is seen as the variances involving current assets and current liabilities. Yaday et al. (2009) indicated that, the excess among current assets and current liabilities signifies the liquidity margin present to fulfill the cash requirements to sustain day to day operations as well as advantage from profitable investment prospects.
Prior studies by Javid (2014) and Yazdanfar & Öhman (2014) showed major inconsistencies in account receivables, inventory conversion cycle and firm profitability. The study therefore seeks to highlight the theoretical and practical managerial challenges with the view of offering solutions and recommendation based on the outcomes of the study.
Majority of the prior studies related to account receivables, inventory conversion on profitability in the manufacturing and health care industry, are drawn from developed economies with very little in the developing economies while also have mixed conclusion. This paper, actually, attempts to fill this gap and contribute to the existing body of knowledge by using powerful instruments, like correlation and Ordinary Least Square (OLS) multiple regression, to explore how profitable manufacturing and health care firms cover the period from 2011 to 2020. The study explores the impact of accounts receivables, inventory conversion cycle with profitability in sample of manufacturing and health care firms in Ghana. The conclusion of the study may direct management of Ghanaian manufacturing and health care firms, and from other similar countries. To understand how account receivables and inventory conversion cycle impact their profitability, which may argument their financial decision making. Based on this, the purpose of this study is therefore to investigate the impact of account receivables and inventory conversion cycle on performance of Manufacturing Firms Listed on Ghana Stock Exchange.
Objectives of the Study
1) To investigate relationship between account receivable period and manufacturing firms profitability.
2) To investigate relationship between inventory conversion period and manufacturing firms performance.
2. Literature Review, Conceptual Framework and Research Hypothesis
2.1. The Concept of Working Capital
Working capital (WC) has been of keen interest to all business sectors all over the world (Ray, 2012) . The choice of capital structure adopted by manufacturing companies plays a major role in their overall performance; thus, profitability (Ray, 2012) . To understand WC, so many efforts have been put into both theoretical and empirical perspectives. WC plays a key role in the assessment of companies’ performances by taking a critical look at the liquidity of organizations which is managed. Manufacturing companies have become very concerned about liquidity management behaviors, thus, developing strategies to manage their WC effectively and resourcefully, thereby, improving the overall performance of these companies. Various studies have indicated that WC is the most effective performance determinant or factor in manufacturing companies (Altaf & Shah, 2017; Shah & Chaudhry, 2016) . Akinwande (2009) defines working capital as “the surplus of a firm’s current asset over current liabilities”. The implication is that, a firm’s inventories, short-term investments, account receivables, cash and cash equivalents, prepaid expenses are financed by its short-term liabilities. To (Deng, 2013) , working capital is regularly employed to detail organization’s level of liquidity.
2.2. Working Capital Management Policy
To (Ireri, 2006) , WC policy has a key responsibility in organizations continued existence given that its effect profitability as well as the associated risk those organizations are likely to face. Moreover, Afza and Nazir (2008) documented that, WCM policy is a plan entailing choice concerning short term assets and liabilities of companies such that their utilization and how their combination has strategic consequence on the risk and performance of the companies. Sohail (2016) proposed that, working capital policy is pivoted on the risk and trade off inbuilt in unconventional policies. Effective WC policies are fundamental to companies’ long-run development and continued existence. WCM policies of companies have a considerable effect on its liquidity as well as profitability. Both (Mathur, 2003) and (Arnold, 2008) agree that WCP has three categories; the defensive, aggressive and conservative policies.
Defensive Policy : Under this policy, a firm acquires fixed assets and a greater part of its current assets by both equity and long-term financing. The main aim of the firm is to adopt a funding approach that builds a relationship between the life span of the assets and the tenor of the source of financing (Paramasivan, 2009) . The policy seeks to minimize risk by reducing current liabilities. However, this affects profitability due to the cost of borrowing for a longer term (Arnold, 2008) . The firm will therefore not keep higher cash or cash balances, stocks or offer flexible credit terms. Firms that operate in questionable economies mostly adopt this policy. Arnold (2008) pointed out that, holding up tall level of inventory to meet unplanned increase in demand and to ensure production continuity. The expected cash conversion cycle for such a policy is longer. This policy might have harmful influence on the level of performance because the cost of borrowing might surpass the advantages of the policy (Arnold, 2008) .
Aggressive Policy : Short-term debts may be adopted by a firm to finance current assets due to the lower cost of borrowing associated with such debts (Osundina, 2014) . Short-term debts are riskier in nature especially in cases where firms offer credit trades (Paramasivan, 2009) . Default from trade customers may inhibit the firm’s financial performance of the company. Paramasivan (2009) argued that in the aggressive policy the entire projected prerequisite of current assets and part of fixed assets must be financed by debts that have shorter life span. This makes the policy riskier however, less expensive and more profitable. Furthermore, few finance managers take even more risk by financing long term asset with short term debts and this approach push the working capital on the negative side (Hussain, Farooz, & Khan, 2012) . Firms will go in for financing that has lower costs. This is to make sure the firm always has enough to settle its liabilities. It is advisable for companies that adopt the aggressive working capital policy to offer shorter tenor for credit sales, keep smaller volumes of cash or cash balances as well as hold smaller volumes of inventory in stock (Gorondutse & Hilman, 2013) . Adopting the aggressive working capital approach means a firm will have a minimal CCC because of longer credit through reduction of stock period and receivables (Gorondutse & Hilman, 2013) .
Conservative Policy : This is a mixture of the aggressive and defensive working capital policies. Here, the firm uses financing that have shorter tenors to finance those current assets that are chronological while using financing methods that have longer tenors to finance fixed assets and current assets that are enduring (Brigham, 2007) . Paramasivan (2009) suggests that another name for this policy is “low profit, low risk” policy. While minimizing the inability for a firm to meet financial obligations, the approach also seeks to minimize the ability for the firm to acquire more current assets.
Moderate Approach : The approach of moderate indicated that, investment in current assets is seen to be neither high nor low to a specified degree of sales (Mathuva, 2011) . This approach is purposely carried out to maintain liquidity as well as profitability. Current asset to total ratio can be employed to analyze the investment policy practiced by companies for financing current asset. A high ratio associated with companies illustrates that, those companies have more investment in current assets (Karadagli, 2012) .
2.3. Empirical Review
Phuong & Hung (2020) , investigated the relationship between WCF and firm profitability in Vietnam. The study employed regression method using a total sample of 5295 firms listed on the Vietnam stock market ranging from 2009 to 2018. The result revealed that there is significant indirect linkage between account receivables and cash conversion cycle on firm profitability. Similarly, Salawu & Alao (2014) , investigated the effect of WCF on manufacturing firms’ performance in Nigeria. Based on this, the results of the study indicated that there is significant positive relationship between average collection period and profitability. Also, Afeef (2011) , determined the effect of WCF and firm profitability. The study employed multiple regression method to analyse the gathered data. The result revealed there is indirect relationship between inventory conversion period and receivable collection period with firms’ profitability. Soukhakian & Khodakarami (2019) , investigated the relationship between WCF and profitability of firms. The study indicated there is significant positive impact between account receivables and firms profitability.
2.4. Conceptual Framework of Working Capital
Turner (2013) indicates that the conceptual framework presents the background for carrying out research as well as transcribing findings. The conceptual framework for this current study is working capital management (WCM) ( Figure 1 ).
2.4.1. Average Number of Days Account Receivable and Profitability
Salman et al. (2014) clearly pointed out that, accounts receivable management involves making good credit customers choice as well as increasing the rate of collecting from them. Economically, when debtors are permitted to cling to payments for longer period, companies are pushed into a position that incurs an opportunity cost. The adverse implication is that, companies would have to forgo investing in other positive net present value activities. To Mathur (2003) , account receivables, demonstrates that, it is one of the company’s most essential and strategic component of its assets aside the capital injected into financing
Figure 1 . Conceptual framework.
fixed assets such as plant and machinery as well inventory. The connections between accounts receivable and profitability have been considered to have different opposing perspectives based on research findings. Empirical studies by Nobanee (2011) ; Raheman & Nasr (2007) demonstrate that, ADR is positively associated with profitability. The implication is that companies that adopt conservative approach to WCM are linked with this finding. On the contrary, studies by Tauringana & Afrifa (2013) ; Falope & Ajilore (2009) reported different findings indicating that, ADR and profitability are adversely connected. It is also believed that companies employed aggressive approach to WCM would experience this outcome. These arguments lead us to propose:
H 1 : There is a negative relationship between account receivable period and profitability.
2.4.2. Average Number of Days Inventory and Profitability
Brigham & Houston (2007) explained that inventory represent a key ingredient of total working capital. Operationally, it has been argued that, proficient management of inventory would bring significant earnings to companies’ shareholders (Mathuva, 2011) . Therefore, competent inventory management shall include the management of two contradictory goals which consists of minimization of investment in inventory as well as preservation of the smooth movement of raw materials for manufacturing and sales on the other. Lazaridis & Tryfonidis (2006) contended that a well-organized management of inventory guarantees a constant working capital which eventually raises profitability. The consequence is that companies are required by necessity to continuously do their best to maintain an optimum level of inventory. A high level of inventory leads to unutilized inventory leading to tide up of capital, account payable and receivables contribute to the risk (Talat & Nazir, 2011) . McInnes (2000) argues that, about 94% of companies in no way build linkages among their WCM components. Turnover is considered as important measures of proficient supervision of inventory; it is computed as annual sales dividing average inventory. This signifies how efficient our investment in inventory is. Larger turnover leads to larger efficiency and reduction in inventory may lead to inventory shortage. Empirical findings with regards to the influences of accounts receivable on profitability have been established to have diverse contrasting standpoints. Nobanee (2011) & Raheman & Nasr (2007) in their works proved that, inventory holding component (ADI) of WCM has positive connection with profitability which is based on the application of conservative approach to WCM. Conversely, it has been revealed that, there is no substantial relationship between ADI and profitability. These findings were evidenced by (Tauringana & Afrifa, 2013; Falope & Ajilore 2009; Deloof, 2003) . The application of aggressive approach to WCM is linked with this finding. The implication to manufacturing companies is that the strategy of managing WC has a substantial influence on the level of profitability of a firm. As such, efforts must be carried out to decrease the number of days’ inventory. These arguments lead us to propose:
H 2 : There is a negative relationship between inventory conversion period and profitability.
3.1. Research Approach
Quantitative research was employed as the research approach. The justification of the said approach is that it allows for adequate numerical data that is involve with hypothesis analysis. Also, the quantitative research helps give objective data that clearly communicate through statistics and numbers and finally, it allows for generalization of results.
3.2. Research Design
The study adopted cross-sectional study to address the objectives of the study. The motivation for the choice of cross-sectional study is because it allows all data to be collected at a point in time and gives room for the study to obtain a multiple outcomes relating to the study. Lastly, it helps collect data from large pool of the study subjects as well as ensures comparison of difference between groups.
3.3. Data and Data Type Sources
The study sampled six (6) listed consumable and health care manufacturing firms on Ghana Stock Exchange from 2011-2020. The head of finance departments from each of the sampled listed consumable and health care manufacturing firms were employed to participate in the study through provision of relevant information. The study adopted secondary source of information through the audited financial statements from the sampled firms. The justification of the adopted of the sampled listed firms was based on availability of complete data for the period under investigation.
3.4. Model Specification
The study adopted multiple regression that was in line with the works by Abuzayed (2012) , and Afrifa & Padachi (2016) . The study estimated the following models;
Model1 : ROA it = α + β 1 CR it + β 2 SG it + β 3 CS it + β 4 ARP it + ε it (1)
Model 2 : ROA it = α + β 1 CR it + β 2 SG it + β 3 CS it + β 4 ICP it + ε it (2)
where i denotes the cross-section, t denotes time-series dimension, while β 0 is the beta coefficient, and ε it indicates the error term. Also, CR represents current ratio, SG represents sales growth, CS represents cash to sales, ARP represents account receivables period, ICP represents inventory conversion period and ROA represents return on assets.
3.5. Variable Description and Measurement ( Table 1 )
Table 1 . Variables description and measurement.
Source: Research team own construct, 2023.
4. Results and Discussions
4.1. Descriptive Statistics
The study descriptive statistics as shown in Table 2 was based on using mean, standard deviation, skewness and kurtosis. Based on this, the result is illustrated in Table 2 .
The study revealed the results of the descriptive statistics of six (6) manufacturing firms listed on the Ghana Stock Exchange using 10 year observations. The study indicated that inventory convention period shown average mean of 48.2 days with standard deviation of 40.2. The implication is that the manufacturing firms in Ghana manufacture and sell out their inventory within 48.2 days. Thus, the higher average mean score indicates that the manufacturing firms hold large part of their inventories which made it difficult to process and sell within a short period. Hence, the study shown that manufacturing firms such as Dannex Ayrton Starwin Limited took longer period in manufacturing their drugs than Fan Milk which uses a shorter period in manufacturing their fun milk foods. This implies that manufacturing forms that are found within the consumable goods industry are likely to have shorter period in converting their input into finished products as compare to those manufacturing firms found within the healthcare industry.
Table 2 . Summary of descriptive statistics of the variables.
Source: Field data, 2023.
The study also revealed that the account receivables indicated a mean score of 44 days with standard deviation of 38. This implies that majority of the manufacturing firms accepted cash from their respective debtors within 44 days. The implication is that manufacturing firms found within the healthcare industry in Ghana are mostly found of supplying their drugs products to health facilities which are largely owned by government of Ghana. Therefore, it took long time for these firms to be paid as result of the bureaucratic nature that existed within the government payment system. This shows that large volume of sales that was made by these healthcare firms accounted for delayed in receipt of debt from their customers as compared to the consumable good firms. The study indicated that the size of the firms under study is more approximately close to normal distribution with the study skewness closer to 0 and kurtosis is almost 3.
4.2. Reliability and Validity Test
Table 3 revealed the VIF results of the study variables. Based on this, the VIF was conducted to test the multicollinearity among the predictors’ variables. Hence, the acceptable rate for the maximum VIF is 10. The study results indicated that all the independent variables values are found within the range of 1.029 to 1.042. The implication is that VIF variable values are not correlated with each other and the predictors are significant at 0.000. The study result was in line with the work by Chatterjee & Hadi (2012) .
4.3. Correlation Matrix
The correlations of the variables under study were presented in Table 4 . The study indicated that the coefficients are less than 0.6. Based on the standard of Pedroni et al. (2020) , the result in Table 4 support the conclusion there is no evidence of multicollinearity problem in the results of the study. Based on the results in Table 4 , the study revealed that there is an adverse significant correlation between account receivables period and return on assets (r = −0.301, p-value < 0.05). The study is consisted with the work by Mansoori & Muhammad (2012) ;
Table 3 . Variance inflation factor results of the variables.
Table 4 . Correlation matrix.
*, **Significant at the 0.05 and 0.01 levels, respectively (two-tailed); Correlation coefficients are significant at * p < 0.01; and ** p < 0.05; Source: Field Data, 2023.
Naimulbari (2012) & Dong (2010) indicated a negative relationship between account receivables and the profitability of the firm. Again, there is significant negative correlation between inventory conversion period and return on asset (r = 0.418, p -value < 0.05). Also, there is no significant positive correlation between firms current ratio and return on asset (r = 0.198, p -value < 0.05). Further, the study indicates that there is a direct no significant correlation between sales growth and return on asset (r = 0.110, p < 0.05). Finally, the study indicated there is no significant direct correlation between cash to sales and return on asset (r = 0.096, p -value < 0.05).
4.4. Regression Analysis
As showed in Table 5 , the study revealed the regression estimation which indicated 48.7% (Adjusted-R square = 0.487) variability in return on asset was caused by account receivables period, inventory conversion period, current ratio, sales growth and cash to sales. In other words, by account receivables period, inventory conversion period, current ratio, sales growth and cash to sales explained only 0.487 units on return on assets as a dependent variable. The study also
Table 5 . Effect of account receivables and inventory conversion period on profitability.
Significant at 95% confidence interval.
revealed that there is statistically negative (Beta = −0.201) and significant ( p -value = 0.000) effect of account receivables period on return on assets. This implies that a day increase in number of days account receivables tend to reduce firms return on asset by 20.1% and vice versa. Thus, H1 is fully supported, which concluded that a number of days accounts receivable has statistcally significant and negative effect on return on asset.
Also, the study revealed that there is statistically significant negative effect between inventory conversion period and return on asset (Beta = −0.273, T = −3.976, p -value = 0.000). This implies that a day increase in number of days inventory will reduce return on asset by 27.3% and vice versa. Thus, H2 is fully supported, which concluded that a number of days inventory has statistically significant and negative effect on return on asset. Lastly, the study results revealed the control variables. Hence, the results indicated that (current ratio, sales growth and cash to sales) had positive no significant effect (Beta = 0.115, p > 0.05), (Beta = 0.071, p > 0.05), (Beta = 0.092, p > 0.05) respectively on return on asset.
5. Conclusion and Recommendations
The study concluded that there is statistically significant negative effect between accounts receivables and inventory conversion period on firms’ profitability. The study’s finding is consistent with the work by Soukhakian & Khodakarami (2019) ; Rahman, Iqbal and Nadeem, (2019) and Phuong and Hung, 2020 , which indicates that there is adverse effect of number of days accounts receivables and number of days inventories on firms profitability. However, the study results are inconsistent with the work by Kasahun (2020) ; Dong and Su (2010) , which indicates that there is direct effect of accounts receivables and inventory period on firms profitability. Based on the results, the implication is that the manufacturing firms with higher return on asset had smaller number of days inventory. Hence, the firms are efficient in ensuring that their raw materials were properly converted into finished products which also led to marketing of their products. The implication is that the inventory is sold out within short period which led to increase in sales as well as improved firms return on asset. The study shows that it is important for firms that deem to have higher return on asset in order to reduce the number of days inventory to 48 or lower.
The study also observed that firms with higher return on asset tend to have smaller days of accounts receivables. The study also concluded that manufacturing firms had good credit policies which tend to serve as innovative incentives to ensure that debtor makes good of their indebtedness in short period. The implication is that the firms are able to have more liquid to settle their trade creditors which tend to lead to more order of inventories. The firms attained certain level of goodwill from their creditors which tend to lead to constant supply of inventory to serve their firms customers satisfactory. This resultant effect is that there are repeat purchases which improve firms’ profitability.
The study also revealed that the number of days account receivables had average score of 44.024 which was lower than inventory conversion period of 48.152. The implication is that the manufacturing firms in Ghana are able to convert trade debtors into cash within one and half months. This signified an improvement in return on asset which translated into maximization of shareholders’ wealth irrespective of whether pay-out ratio is high or not. Thus, the changes that occurred in the firms pay-out ratios are considered not relevant on the assumption that WCM tends to affect shareholders wealth at point where the return on asset is high with the assurance that there are prompt payment form debtors. Therefore, shareholders will be paid either divided which can therefore be plough back as retained earning which affects capital gains which directly affects firm wealth. Based on this, the study concluded that WCM tend to impact on firms profitability and shareholders wealth. Therefore, the study recommends that the manufacturing firms in Ghana should reduce number of days accounts receivables to 44 days or lower with the motivation of improving return on asset.
6. Limitation and Suggestion for Further Research
The study was limited based on the small sample size. Therefore, it is difficult for the study to make general generalization of the results using the small sample size to represent the entire population of the manufacturing and health care firms in the country. Therefore, it is important for future research to increase the sample size includes the all firms across the regions of Ghana. This will help the study to make general conclusion on the subject matter. Also, the study was limited since a single source of information was employed. Hence, future research should adopt mixed method of study. This will help the study to divergent source of information to complement each result.
Thanks to all authors for their efforts in conducting this research.
Conflicts of Interest
The authors declare no conflicts of interest.
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