Effect of cash conversion cycle on profitability in mtn and globacom

Thesis Abstract

Abstract
This study explores the effect of the cash conversion cycle (CCC) on the profitability of two major telecommunication companies in Nigeria, MTN and Globacom. The cash conversion cycle is a crucial financial metric that reflects the efficiency of a company's working capital management. A shorter CCC indicates that the company is able to convert its investments in inventory and accounts receivable into cash more rapidly, thereby improving liquidity and potentially increasing profitability. The research methodology involved collecting financial data from the annual reports of MTN and Globacom over a five-year period. Key financial indicators such as the CCC, profitability ratios, and other relevant financial metrics were analyzed to determine the relationship between the CCC and profitability. The study employed regression analysis to quantify the impact of the CCC on profitability, taking into account other factors that could influence financial performance. The findings of the study revealed that there is a significant relationship between the CCC and profitability in both MTN and Globacom. A shorter cash conversion cycle was associated with higher profitability, indicating that efficient working capital management positively impacts financial performance. The regression analysis confirmed that the CCC has a direct and positive effect on profitability for both companies, suggesting that reducing the CCC can lead to improved profitability. Overall, the results of this study provide valuable insights for managers and investors in the telecom industry regarding the importance of optimizing the cash conversion cycle to enhance profitability. By reducing the time it takes to convert investments in inventory and accounts receivable into cash, companies like MTN and Globacom can improve their financial performance and create value for shareholders. This research contributes to the existing literature on working capital management and financial performance in the context of the telecommunications sector, highlighting the significance of efficient cash flow management for sustainable profitability.