Date of Award
5-2019
Document Type
Thesis
Degree Name
Master of Science in Engineering Management (MSEM)
Department
Engineering Management
First Advisor
Kline
Second Advisor
Craig Downing
Third Advisor
Thomas James
Abstract
The U.S. total business inventories were almost 2 trillion U.S. dollars in 2017 which is about 15% of the U.S. gross national product. This implies that there is a great opportunity for U.S. companies to increase their liquidity and the amount of cash available for investment by properly managing their inventory. This research is being conducted to explore the relationship between inventory management and financial performance of the major automotive companies in the U.S. particularly and other public U.S. companies in different industrial sectors.
This research examined the impact and relationship between inventory days, current ratio, debt-to-equity ratio and company’s size on the return on assets. A cross sectional descriptive study design is used in this study, which is based on the public data of the selected companies which includes annual sales, cost of goods sold, total liabilities, total assets, current liabilities, current assets, debt-to-equity ratio, gross profit margin and net income. This data was collected from the income statements and balance sheets of the selected U.S. companies during the years from 2009 to 2017. For the data analysis, Microsoft Excel and Minitab were used.
The results obtained from Pearson correlation matrices and backward elimination stepwise multiple-regression analysis has shown that the included independent variables; inventory days, current ratio, debt-to-equity ratio and company’s size impact and relationship with return on assets was different from one company to another, and sometimes was not even statistically significant. It is postulated that the reasons for the variability are the absence of data related for crucial factors such as the product mixture that a company produces, the sales of each product, the relationship with suppliers, distributors and dealers, transportation contracts, and the location of suppliers. These factors could affect inventory levels in companies, ordering cost and holding cost, which in turns would affect the financial performance.
Recommended Citation
Ramadan, Mohammed G., "The Impact of Inventory Management on the Financial Performance of U.S. Public Companies" (2019). Graduate Theses - Engineering Management. 15.
https://scholar.rose-hulman.edu/engineering_management_grad_theses/15