Table 1 Definition of the variables.
Variables | Abbreviation | Definition | Calculations |
|---|---|---|---|
Gross operating Profit | GOP | “A measure of the amount of profit earned per dollar of investment; equal to gross income divided by Total Assets of the firm.” | =Gross income/total assets |
Exchange rate Movement | ER | “The exchange rate (ER) indicates the number of units of individual currency that relations for exchange with another unit of currency.” | The current Exchange rate with US dollar every year = Pak Rupee/US$ |
Receivable in Days | ARD | The average number of days for which receivables are outstanding before being collected. | Receivables* days in the year/annual credit sales |
Payable in Day | APD | The average number of days for which payables are due before being paid | Accounts payable*days in the year/annual credit purchases |
Inventory Turnover Ratio | ITR | How many times inventory is turned over into receivables through sales during the year. | Inventory *days in the year/cost of goods sold |
Cash Conversion Cycle | CCC | “The length of time from the actual outlay of cash for purchases until the collection of receivables resulting from the sale of goods or services; also called the cash conversion cycle.” | =Inventory turnover ratio + receivable days–payables days |
Real exchange rate | REER | The real exchange rate means the number of goods and services that can exchange in the domestic world for any foreign country’s goods and services. | |
1st interaction variable | CCC*ER | Product of two independent variables or multiplication, the term (ARD*ER) is called interaction term. The impact of X on Y is independent of a value of z, but the world more complicated than that? Specifically, does the effect of x depend on the value of Z holds? If “yes,” then there is an interaction effect. The product term should be included, such as explained in the following column of the same rows. | ARD*ER Y = a + bx + (bx1*bx2) + e |
2nd interaction variable | APD*ER | Product of two independent variables or multiplication, the term (APD*ER) is called interaction term. | APD*ER Y = a + bx + (bx1*bx2) + e |
Age | Age | The firms incorporate to 2018 numbers of years | Numbers of years |
Size | Size | Amount of total assets. | Log of total assets |
Debt equity ratio | DER | Proportionate of debts and equity into total capital. | Short-run plus long-run debts/total assets |
Net cash flow from operations | NCFO | Net cash flows get from business operation during the study periods. | |
Liquidity | Liq | Current assets to current liabilities. | Current assets/current liabilities |
Interest rate | Irate | Nominal interest rate reveals into the economy decided by State bank. |
