Abstract:
A crucial role plays by Inventory management in balancing the cost and benefits
linked with holding inventory. In the inventory management literature, several studies
have been carried out regarding maintaining inventory level in a firm has been widely
studied even though still there is contradiction in viewing inventory as both an asset
and a liability. Few of those studies on the microeconomic determinants and
consequences of inventories are somewhat inconsistent, thus this study take intention
to test this issue with Beverage Food and Tobacco sector listed Companies. The
methods of descriptive quantitative and Linear Regression Analysis are used in this
study. The variables of inventory conversion period, operating cycle, current ratio,
cash conversion cycle and return on equity are considered. Data from 2012 to 2016
was gathered as panel data from 20 firms’ annual reports of beverage food and
tobacco sector for the analysis. The results expose that, operating cycle has a positive
significant relationship however cash conversion cycle negatively related with
dependent variable of return on equity, but other variables haven’t significant
relationship with dependent variable of return on equity. In case of regression analysis
result, it says inventory management has 0.158 significant impact on return on equity
at 5% level as a whole model but individually operating cycle and inventory
conversion period have significant impact. These findings are useful to the directors
and financial management of beverage food and tobacco sector’s firms as a useful
knowledge for decision makings in this field. So, this sector firms should take great
care on all of these measures of inventory management when making policies and
developing strategies regarding inventory management of this sector firms to improve
their return on equity
