THE RELATIONSHIP BETWEEN CASH CONVERSION CYCLES AND PROFIT MARGINS IN RWANDA'S CONSUMER GOODS INDUSTRIES

This study investigates the relationship between cash conversion cycles (CCC) and profit margins in Rwanda's consumer goods industries. Employing a quantitative research design, financial data from selected companies was analyzed using regression models to explore CCC components-inventory turnover, receivables collection, and payables deferral-and their correlation with profitability. The results reveal a strong negative correlation between elongated CCCs and profitability in sectors like textiles (-0.85), while optimized CCCs, as observed in the pharmaceutical sector (25 days), positively influenced profit margins (+0.72), which rose from 20% to 25%. Regression analysis highlights a 12.7% decline in inventory turnover as a key factor extending CCC and reducing liquidity. The findings underscore the critical need for strategic working capital management to enhance financial outcomes. The study concludes that businesses optimizing CCC can improve profit margins by 1-3%, recommending enhanced inventory systems, streamlined receivables processes, and tailored sectoral strategies for CCC management.