Relationship of Cash Conversion Cycle (CCC) and Profitability of the Firm: Evidence from Tehran Stock Exchange

This study examines the effect of Cash Conversion Cycle (CCC) and the deviation from optimal level of CCC on profitability of the firms in the Iranian capital market. A sample consisted of 97 listed companies on Tehran Stock Exchange (TSE) for the period 2005 to 2011 was subjected to this study. The results do not indicate any significant relationship between profitability, measured as the ratio of Net Operating Income (NOI) to sales, and Cash Conversion Cycle (CCC). But we do find that deviation from the optimal CCC level has an inverse and significant effect on profitability. That is to say, the further the company moves away from the optimal CCC level, the less profitable it becomes