Analysis of the Effect of Cash Conversion Cycle on Profitability of Cement Companies Listed at Dar es salaam Stock Exchange (DSE) in Tanzania

Ntemi Zulfa, Felex Vicent

Volume: 11 Issue: 05 2025

Abstract:

This research investigated the effectiveness with which two publicly traded cement manufacturers on the Dar es Salaam Stock Exchange (DSE) in Tanzania manage their cash flow and the subsequent impact on their financial performance from 2001 to 2023. Financial performance was evaluated using Return on Assets (ROA). The study employed unbalanced panel data analysis and regression techniques within the STATA software environment, utilizing the cash conversion cycle (composed of Debtors Collection Period, Inventory Conversion Period, and Creditors Payment Period) as key variables. The findings revealed a statistically significant inverse relationship between financial performance and Inventory Holding Period, and a statistically significant positive association with Payables Payment Period. However, Receivables Collection Period did not exhibit a significant impact. The study concludes that Inventory Holding Period and Payables Payment Period are influential determinants of financial performance. It recommends that cement companies strive to optimize their cash conversion cycle by taming improved relationships with suppliers to facilitate extended credit terms, and by refining production planning processes to enhance profitability.

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