| Efficiency ratios vary widely across retailers and over time. Historically, a lot of analysis has been done in the retail sector, but the focus was solely on inventory. On the other hand, some researchers employed ratio analysis to analyse general procedures and failures prediction. In this research, empirical models using financial data of thirty U.S retailers are developed during the period between 2006 and 2015 in order to investigate the correlation of efficiency ratios and their impact on profitability of the retail sector. The efficiency factors calculated and used in the analysis are days sales outstanding, days inventory, payables period, cash conversion cycle, receivables turnover, and inventory turnover. The two metrics; return on assets and return on invested capital are used to assess the profitability of individual retail companies. Pearson correlation and multiple regression analysis are employed to study the effect of efficiency ratios on the profitability of American retail companies as well as overall profitability of the U.S. retail industry.;While there are exceptions to the general finding, both for particular sectors in the U.S retail industry and specific firms, this study offers evidence recommending that working capital management strategies tend to improve firms' performance. |
