The impact of credit sales management on profitability and liquidity of publicly listed firms in the food and beverage industry in the Philippines (2008 - 2012)

• Main Authors: Dalistan, Roxanne S., Jumagdao, Jennyvine D., Kim, Woolim Y., Rama, Maria Czarina E.
• Format: text
• Language: English
• Published: Animo Repository 2014
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/11968
• Institution: De La Salle University

Every business’ goal is to be as profitable as possible. To achieve this, many entities allow customers to pay on credit for the anticipation that it will boost profitability. However, allowing credits can also result to the risk of uncollectible accounts which may affect the firm’s flow of cash. The performance of the company, particularly its profitability and liquidity, is at stake if there are inefficiencies in collecting credit. In light of this, this study examined how credit sales management (CSM) affects the profitability and liquidity of companies under the food and beverage industry in the Philippines. It was found out that credit sales management has a significant impact on both profitability and liquidity. The results showed that the relationship of CSM to liquidity is more correlated, with r-squared of 40.07%, as compared to that of profitability with r-squared of 12.61%. This indicates that in terms of CSM, liquidity benefits more than profitability. Thus, effective CSM is important to achieve optimum financial performance and minimize the factors leading to any financial downturn. It was also determined that CSM has significant favorable relationship with some components of profitability which are GPM, OPM, CFM and ROA. The effect of CSM is no longer significant to NPM, which includes tax and interest expense, and ROCE and ROE, which includes retained earnings, share capital and treasury shares. Meanwhile, CSM has significant favorable relationship with all the components of liquidity except CCC, which includes DIO and DPO. The relationship between profitability and liquidity was also examined. Results indicated that profitability and liquidity have moderate degree of positive relationship. It was concluded this is because their positive relationship will only take effect in the long run, and is not applicable in the short run. The study was observed to be consistent with other studies conducted by Hirigoyen (1985) and Ifurueze (2013). Overall, it was therefore recommended that policy makers should promote efficient management of CSM to improve the performance of a company.