Abstract
The aim of the study is to explore the interaction effect of macroeconomics indicators, and working capital flows on financial performance in a developing economy. By using the static and dynamic approach of panel analysis, it has been shown that there is a relationship between the components of working capital and the gross profit and cash conversion duration. Second, while interest rates used as an interaction variable with the average payable days have adverse effects, firm performance would decrease if interest rates increase. The average payable duration extends; instead of primarily regressing, the average payable period positively correlates with firm performance. The conversion cycle of cash has a negative relationship, but it reverses its actions after using interest rate interaction. There is a negative relationship with gross profit in the simple regression exchange rate and cash conversion cycle while using the second interaction variable with the cash conversion cycle, has positive effects. In addition, the exchange rate gets higher to increase the cash conversion length, financial performance will be increased. In addition, the exchange rate gets higher to increase the cash conversion length, financial performance will be increased. This study receives new results, the exchange rate increases, companies that can pay early to payable will get higher firm performance while exchange rate and the interest rate have a significant role in changing the firm performance.
Highlights
The energy sector has contributed significantly to economic growth (Tran et al, 2020)
By using the static and dynamic approach of panel analysis, and firm-level dataset from 2013 to 2018, empirical results show that the firm either does not efficiently control current assets or has sufficient funds from companies to tackle advantageous schemes
This indicates that huge profits are connected to low exchange rates, it is further rationale to investigate that the fuel and energy industry accounts for most of its foreign exchange inputs and local currency turnover in cases of excessive exchange rates
Summary
The energy sector has contributed significantly to economic growth (Tran et al, 2020) It concludes that the energy sector is a significant industry in each economy that creates jobs, demand for energy, and economic development. In response to inventories purchasing and selling, the cash conversion cycle (CCC) is a complex model where it takes time, a business obtained from debtors and paid to payables (Tsagem, 2020). Efficient investment in WC aims to recover excessive investment in current assets when managing a company’s ability to find a good balance between liquidity and profitability (Hamza et al, 2015). Notify the organization to see if the checked association is impacted by the firms’ sizes and ages when handling the Interaction between CCC and gross profit (Davis and Bendickson, 2020; Mate and Occhino, 2020)
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