Inventory Turnover and Firm Profitability: A Saudi Arabian Investigation

Abstract

The purpose of this paper is to explore the impact of inventory turnover on the profitability level of Saudi manufacturers. The data comprises 78 manufacturers listed on the Saudi Stock Exchange and was used to test the research hypothesis. The related data over the 2017–2021 period were collected from annual reports and the Datastream database. After running a multiple regression analysis with a fixed effects model, findings showed that the higher the inventory turnover ratio, the higher the cost which could be suppressed, and the greater the profitability of a company. The outcomes of this study have significant implications for managerial accounting issues in the setting of Saudi Arabia. Further, they provide policy recommendations to decision makers and assist managers in enhancing sustainability in the manufacturing sector. This research is the first to investigate this relationship including the impact of COVID-19 among Saudi companies in several industries, thus filling a gap in comparable research.