IDEAS home Printed from https://ideas.repec.org/a/eme/ijppmp/v63y2014i3p341-353.html
   My bibliography  Save this article

Modifying the cash conversion cycle: revealing concealed advance payments

Author

Listed:
  • Anna-Maria Talonpoika
  • Sari Monto
  • Miia Pirttilä
  • Timo Kärri

Abstract

Purpose - – The cash conversion cycle (CCC) is widely used in the academic studies of working capital management and supply chain efficiency. The purpose of this paper is to introduce a modification of this measure that takes into account advance payments as a component of operational working capital. Design/methodology/approach - – A new measure, the modified cash conversion cycle (mCCC) is introduced and tested with empirical data of companies in Helsinki Stock Exchange. Findings - – The mCCC reveals the real efficiency of operational working capital in companies that receive advance payments to a remarkable extent. Research limitations/implications - – The mCCC can be used in empirical analysis in academic studies. In this paper, the empirical data are used only for testing the mCCC. The paper concerns received advance payments, but the mCCC can also be extended also to other components of operational working capital ignored by the traditional CCC. Practical implications - – The paper offers insights into the variations of CCC for class teachers, and business practitioners, particularly financiers, who deal with operational working capital, cash flow predictions and calculations. Originality/value - – There are current items that may have a remarkable effect on operational working capital, but traditionally only inventories, accounts receivable and accounts payable are discussed. The authors argue that also other current items should be taken into account, if they affect the efficiency of operational working capital. The new mCCC is encouraged to be used instead of the CCC when observing working capital management.

Suggested Citation

  • Anna-Maria Talonpoika & Sari Monto & Miia Pirttilä & Timo Kärri, 2014. "Modifying the cash conversion cycle: revealing concealed advance payments," International Journal of Productivity and Performance Management, Emerald Group Publishing Limited, vol. 63(3), pages 341-353, April.
    • Handle: RePEc:eme:ijppmp:v:63:y:2014:i:3:p:341-353
    DOI: 10.1108/IJPPM-12-2012-0130
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/IJPPM-12-2012-0130/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/IJPPM-12-2012-0130/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/IJPPM-12-2012-0130?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Stanić Milan & Cita Melita & Šulentić Marina Stanić, 2023. "The Influence of Working Capital Management on the Profitability of Manufacturing Enterprises - The Case of Croatia," South East European Journal of Economics and Business, Sciendo, vol. 18(2), pages 126-139, December.
    2. Ivakina, A. & Zenkevich, N., 2018. "Working capital optimization under liquidity constraints in collaborative supply chains," Working Papers 15110, Graduate School of Management, St. Petersburg State University.
    3. Diana Andone & Gheorghe Fatacean & Paul Minteuan & Nicolae Petric, 2017. "Financial Equilibrium In The Energy Industry," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 555-562, July.
    4. Andone Diana & Gaban Lucian, 2016. "The Cash Conversion Cycle In Romanian Companies," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 128-137, February.
    5. Lingesiya Kengatharan & W. S. Sanoli Tissera, 2019. "Do Corporate Governance Practices Influence Working Capital Management Efficiency? Evidence From Listed Manufacturing Companies in Sri Lanka," Research in World Economy, Research in World Economy, Sciedu Press, vol. 10(3), pages 205-216, December.
    6. Chakuu, Sumeer & Masi, Donato & Godsell, Janet, 2019. "Exploring the relationship between mechanisms, actors and instruments in supply chain finance: A systematic literature review," International Journal of Production Economics, Elsevier, vol. 216(C), pages 35-53.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:ijppmp:v:63:y:2014:i:3:p:341-353. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.