Thirdly the cash conversion cycle decreases it will lead to an increase in profitability of the firm, and managers can create a positive value for the shareholders which indicates that it has been maintained. This implies that the longer a firm makes the payment to its creditors, the more profitable it is. Secondly there is a highly significant positive relationship between average payment period and profitability. The key points in this study are firstly there exists a negative relationship between the profitability and the average collection period, the lower the average collection period higher will be the profitability, indicating that a decrease in the number of days a firm receives payment from sales affects the profitability of the firm positively. This study examines the association between the profitability and working capital using the data of 15 US trading companies for the period of 2015 to 2019. They found a negative relationship between Return on Assets and Inventory turnover and Cash conversion cycle the present study is designed to know the direct impact of working capital on profitability by choosing the days of collection, days of payment, days inventory converts to sales and finally the cash conversion cycle.
The results showed that the high investment in inventories and receivables is associated with lower financial performance. Many prior studies have been conducted to measure the relationship between working capital and profitability.
Liquidity plays an important role in the successful running of a business. The success of any business depends on its profitability, liquidity, and solvency.
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