Empirical Analysis of the Influence of Inventory Management on Financial Performance in the Food Industry in Poland

Abstract

The article presents the results of the analysis of changes in inventory management and the results of verification of cause and effect relationships between the results of inventory management and the financial performance of enterprises. The research was conducted on the branches (subsectors) of the food industry in Poland in 2005-2010. The research is based on the econometric analysis of the influence of the length of inventory cycles (in total, materials, production in progress, finished goods, commodities) on financial performance of branches measured with return on sales, assets and equity. The research proved that the effectiveness of inventory management measured with the length of inventory cycles is strongly diversified in the system of branches of the food industry. However, in general in 2005-2010 the inventory cycles were significantly reduced, which points to higher effectiveness of management of those assets. Moreover, on the basis of regression models the improvement in the effectiveness of inventory management measured with the length of total inventory cycles and discrete cycles was found to be positively correlated with profitability. The presented results are the first systematised analysis of the correlations between the results of inventory management and financial performance in the food industry in Poland.

DOI: http://dx.doi.org/10.5755/j01.ee.27.3.5933