NATIONAL ECONOMICS UNIVERSITY CỘNG HÒA XÃ HỘI CHỦ NGHĨA VIỆT NAM FACILITIES ECONOMICS Độc lập – Tự do – Hạnh phúc Hanoi, August 20, 2022 COURSE PROJECTS Topic FACTORS IMPACTING ON THE BUSINESS EFFICIE.
NATIONAL ECONOMICS UNIVERSITY CỘNG HÒA XÃ HỘI CHỦ NGHĨA VIỆT NAM Độc lập – Tự – Hạnh phúc FACILITIES: ECONOMICS -Hanoi, August 20, 2022 COURSE PROJECTS Topic: FACTORS IMPACTING ON THE BUSINESS EFFICIENCY OF ENTERPRISES Student's first and last name: Nguyễn Thanh Thảo Student code: 11203678 Class: Financial Economics FE62A Major: Financial Economics Ha Noi LIST OF ACRONYMS ROS: Return on Sales ROA: Return on Assets ROE: Return on Equity EBIT: Earnings before interest and taxes CCC: The cash conversion cycle DIO: Days of inventory outstanding DSO: Days sales outstanding DPO: Days payables outstanding COGS: Cost of goods sold AR: Accounts Receivable AP: Accounts Payable GDP: Gross Domestic Product DFL: Degree of Financial Leverage CR: Current Ratio QR: Quick Ratio CONCEPTS CHAPTER I INTRODUCTION 1.1 The urgency of the subject Economic researchers and business executives are both concerned about efficiency As we all know, the goal of an enterprise's business activities is to make profits or, more broadly, to increase economic efficiency in its business activities Business efficiency reflects the level of use of an enterprise's resources to achieve maximum efficiency Profits provide enterprises with the means to reproduce and expand production Since then, it has not only created conditions to improve the lives of enterprise employees, but it has also improved conditions to serve customers and fulfill State obligations As a result, it is necessary for any business and managers to evaluate the efficiency of production and business activities in order to identify the factors affecting the efficiency of production and business activities, and to take appropriate measures to promote positive factors and limit negative factors Businesses must improve the efficiency of their production and business activities for the national economy because it contributes to the rational allocation of national resources, avoiding waste when other resources are limited The efficiency of production and business activities is a critical factor in the survival and growth of any business Because market share is divided in a fiercely competitive market economy with many businesses providing products and services, businesses must find ways to increase the results obtained per unit of cost Employees value the efficiency of production and business activities because an effective business provides good conditions for employee care, such as a satisfactory salary regime, good working conditions, and appropriate employee policies Thus, production and business activity efficiency also has the meaning of motivating employees In short, any business operating in any industry or field will face challenges in today's fiercely competitive environment As a result, all businesses must develop their own business objectives Financial management's goal is to maximize the value of the owner's assets Improving business efficiency is beneficial not only to businesses but also to society as a whole How can capital and other enterprise resources be used more effectively? Enterprises must have policies and strategies in place so that they can grow and achieve their objectives despite external and internal factors For these reasons, when it comes to business performance, I only consider economic efficiency in this study.This research looks at the impact of various factors on the efficiency of production and business activities of enterprises listed on the Vietnamese stock exchange, such as demographic factors and external and internal factors 1.2 Objectives of the study The purpose of this research is to identify the factors influencing the business performance of enterprises The goal of this research is to provide a better understanding of the factors that influence business performance and increase the chances of success for enterprises At the same time, it establishes a process for researching, collecting, processing, and formulating hypotheses, as well as proposing research models on factors influencing on efficiency of production and business activities of enterprises 1.3 Research question - What is the efficiency? What is the financial efficiency of enterprises? - What factors affect efficiency of production and business activities of enterprises? CHAPTER II THEORETICAL BASIS ON BUSINESS EFFICIENCY 2.1 Definition 2.1.1 Definition of ‘'efficiency'’ Efficiency is the desired outcome that produces the results that people expect and strive for; it varies in different areas In the manufacturing industry, efficiency means productivity In business, efficiency equals profit Labor efficiency is labor productivity in general, which is measured by the amount of time it takes to produce a unit of product or the number of products produced in a unit of time Relative measurement efficiency Efficiency = Absolute measurement efficiency: Efficiency = Outputs – Inputs In this formula, it shows the number of input units per output unit Then, business managers can decide how much to save or invest in resources Indicators such as total net revenue, total profit, gross profit, and so on are used to measure output factors Labor, machinery and equipment, raw materials, equity, loans, and other input factors are examples of input factors 2.2.2 Definition of ‘’financial efficiency of enterprises’’ Financial efficiency refers to a company meeting all of its goals of providing high-quality service at the lowest possible cost It can be calculated by calculating the percentage of revenue spent on expenses Finance efficiency can be achieved by using technology to simplify standardized processes and consolidating or eliminating noncore activities through outsourcing 2.2 Measurement 2.2.1 ROS Return on sales (ROS) is a ratio used to evaluate a company's operational efficiency An increasing ROS indicates that a company is improving efficiency, while a decreasing ROS could signal impending financial troubles ROS is closely related to a firm's operating profit margin ROS = = This ratio reflects how much profit makes up the percentage of revenue from the enterprise's production and business activities, or in other words, how much profit is generated by one dollar of revenue This ratio is positive, indicating that the company is profitable, and the higher the ratio, the more profitable the company is On the contrary, this ratio is negative, indicating that the enterprise's production and business activities are losing money This ratio is influenced by the enterprise's selling price and production cost; if the selling price is high or the manager manages production and business expenses effectively, or both, this ratio will be high If, on the other hand, this ratio falls, it could be because the enterprise is losing control over production and business costs, or because the enterprise Stanwick's 1998 study also showed that the rate of return on sales (ROS) is a financial indicator to measure the business performance of an enterprise 2.2.2 ROA Return on assets (ROA) is a financial ratio that measures how profitable a company is in comparison to its total assets ROA can be used by corporate management, analysts, and investors to determine how efficiently a company uses its assets to generate a profit ROA = This indicator reflects how much net profit per dollar of assets If this ratio is greater than 0, it shows that the business is profitable The higher this ratio, the more efficient the enterprise is in production and business activities and vice versa McGuire et al., 1988; Russo and Fouts 1997; Stanwick and Stanwick, 2000; Clarkson et al., 2008 use return on total assets (ROA) as a measure to measure business performance of enterprises In another study by Cohen, Chang and Ledford (1997) shared the same opinion, using ROA as a measure to measure business performance 2.2.3 ROE Return on Equity (ROE) is the percentage of a company's annual return (net income) divided by the value of its total shareholders' equity ROE can also be calculated by dividing the firm's dividend growth rate by its earnings retention rate Return on Equity combines the income statement and the balance sheet, comparing net income or profit to shareholders' equity The total return on equity capital represents the firm's ability to turn equity investments into profits To put it another way, it measures the profits made from shareholders' equity for each dollar invested ROE = This indicator reflects how much profit is generated for every dollar spent, or the ability of a dollar of capital to generate business results The greater the efficiency of capital use, the greater an enterprise's production and business efficiency Managers can raise this target by increasing their competitiveness in order to increase revenue while decreasing costs and increasing net profit Either the business uses assets more efficiently by increasing asset turnover, or the business increases this ratio by needing to generate more revenue from the business's existing assets This ratio can also be improved by increasing financial leverage, i.e borrowing to increase investment capital A study by Bowman and Haire (1975) gave an assessment of the business performance of an enterprise assessed through the return on equity (ROE) There are many criteria to evaluate the production and business efficiency of enterprises; from the previous authors' studies, the author selects the indicator group of indicators within the scope of this thesis research Return on sales (ROS), return on total assets (ROA), and return on equity (ROE) are metrics used to assess an enterprise's performance CHAPTER III Theoretical basis of factors affecting business performance of enterprises 3.1 Company Size A large-scale enterprise is one that has a large-scale, high-tech manufacturing force Capable of competing in high-level and novel technical competitions around the world There are scientific research organizations as well as a highly skilled technical staff Diversifying business operations, producing a variety of products, conducting business in a variety of industries, and bringing about change in the market and abroad Small-scale enterprise is defined as an enterprise with a small production force, outdated production tools, a limited operation scope, producing only one typical product, and no extensive research organizations in the market The size of a company is important in determining the performance of a business, and it has a variety of effects on the financial performance of that business Firm size is regarded as an important predictor of a company's profitability Several studies have found that firm size has an effect on business performance Malik (2011) discovered that the size of the firm has a positive relationship with the firm's profitability 3.2 Leverage Businesses use leverage to launch new projects, finance inventory purchases, and grow their operations Borrowing money may be more advantageous for many organizations than using equity or selling assets to finance activities When a firm employs leverage, such as issuing bonds or taking out loans, there is no need to give up ownership holdings in the company, as there is when a company takes on new investors or issues more stock + Financial leverage denotes a company's debt in relation to the amount of money invested in it by its shareholders, also known as equity This is an essential metric since it reveals if a company can repay all of its debts with the capital it has raised A corporation with a high debt-to-equity ratio is regarded as a riskier investment than one with a low debt-to-equity ratio + Operating leverage does not account for borrowed funds Rather, it is a company's fixed cost to variable cost ratio Manufacturing enterprises, for example, have strong operating leverage due to their large continuous expenses High operating leverages indicate that if a company runs into trouble, it will find it more difficult to turn a profit due to the company's relatively high fixed costs Although financial leverage as a force acting on the business increases its financial capacity, it is a two-edged sword If you not know how to use it at the right time, businesses will face numerous financial risks Gupta et al (2010) cite a number of studies that produce contradictory findings regarding the relationship between increased use of debt in capital structure and financial performance Ghosh, Nag, and Sirmans (2000), as well as Berger and Bonaccorsi di Patti (2006), show a positive relationship between leverage and financial performance, whereas Gleason et al (2000), Simerly and Li (2000) show a negative relationship Similarly, Zeitun and Tian (2007) discovered that leverage reduces financial performance 3.3 Liquidity This is an important factor to decide on production capacity as well as an indispensable indicator to evaluate the size and business situation of an enterprise The ability to pay includes the following criteria: + Short-term solvency shows how many VND of short-term debt is secured by VND of short-term assets Current ratio = Enterprise managers need to maintain this indicator is always greater than or equal to 1, meaning that the total short-term assets must be greater than the total shortterm liabilities The short-term solvency of an enterprise is greater than 1, indicating that the enterprise has a good production and business situation + Quick solvency: shows how many VND of short-term assets is guaranteed when not taking into account inventory Quick ratio = An efficient manufacturing business is one with low inventory If this coefficient is less than 1, it means that the production and business of the enterprise does not bring high efficiency + Instant solvency: this indicator shows how much of a company's debt is secured by cash and cash equivalents Cash Ratio = This indicator is also maintained by the manager at a level greater than or equal to Instant solvency will show that the company has the ability to cover short-term debt in cash However, managers also need to consider the appropriate level of cash and cash equivalents in the fund, avoiding the situation of excessive cash reserves without profitability Current assets are highly liquid assets (with the fastest ability to convert to cash) such as cash, bank deposits, accounts receivable, inventory, etc According to Liargovas and Skandalis (2008), firms can use current assets to finance financial investments when external resources are unavailable Higher liquidity, on the other hand, can enable a business to weather the unexpected and difficulties in times of crisis According to Almajali et al (2012), a firm's short-term solvency has a positive effect on its financial performance Because of the positive relationship between shortterm solvency and financial performance of the business, the results show that firms should increase short-term assets while decreasing short-term liabilities 3.4 Cash Conversion Cycle ( CCC) The cash conversion cycle (CCC) is a metric that expresses the time (measured in days) that it takes for a company to convert its investments in inventory and other resources into cash flows from sales This metric takes into account how much time the company needs to sell its inventory, how much time it takes to collect receivables, and how much time it has to pay its bills + CCC= DIO + DSO – DPO + DIO = (Average Inventory / COGS) × Number of Days in Period + DSO = = + DPO = = The CCC is one of several quantitative measures that help evaluate the efficiency of a company’s operations and management A trend of decreasing or steady CCC values over multiple periods is a good sign, while rising ones should lead to more investigation and analysis based on other factors One should bear in mind that CCC applies only to select sectors dependent on inventory management and related operations 3.5 Company Age An enterprise that has been established for a long time, has a long operation time, and has a lot of experience in production and business activities will be more productive than that of a newly put into operation However, short or long operating time does not necessarily affect the production and business activities of enterprises, but also depends on many factors + Competition between enterprises in the industry: Enterprises with many years of operation will have experience in making competitive strategies, so that they can lower their competitors and still lead in the industry In addition, newly established businesses will face many difficulties in terms of capital and management experience In fact, there are many new businesses operating with too many challenges in terms of market competitors, resulting in inefficient production and business + Substitute products: Most of the enterprise's products have substitute products that greatly affect the supply and demand, quality, price and consumption rate of the enterprise's products An enterprise operating in the industry for a long time, with a team of qualified and experienced managers and employees will offer good quality and price replacement products to customers However, a young enterprise, if correctly positioned in the market of the substitute product, will be equally successful than those operating for many years in the industry + Customers: An experienced manager will be able to better locate customers, understand population density, psychology, and consumption habits, and thus have a development orientation for the business's quality and output Customers have a direct impact on enterprise competition, which in turn has an impact on enterprise production and business efficiency + Corporate governance apparatus: Because enterprises operate within the market mechanism, corporate governance apparatus is crucial to their survival and development Corporate governance is the development of a reasonable business strategy and business development for businesses This will serve as the foundation for enterprises' effective business and production activities The quality of the management apparatus has a significant impact on the enterprise's production and business efficiency If the management apparatus is structured in a way that is appropriate for the enterprise's production and business tasks, is compact and flexible, has a clear division of tasks and functions, and has a reasonable coordination mechanism, with a team of capable and highly responsible administrators, the enterprise's production and business activities will be highly efficient + Corporate culture environment: The cultural environment has a specific meaning and has a significant impact on the use of labor and other enterprise factors Corporate culture gives businesses a significant competitive advantage because it directly influences the formation of strategic goals and business policies, while also creating favorable conditions for businesses the successful implementation of the enterprise's chosen business strategy As a result, the efficiency of an enterprise's production and business activities is heavily influenced by its cultural environment A number of studies around the world suggest that the age of the company's operation and the efficiency of production and business are not only theoretically related but also have an impact on each other Loderer, Neusser, and Waelchli, 2009 argue that business efficiency decreases as companies operate for longer periods of time Agarwal and Gort (2002) argued in another study that companies that have been in the industry for a long time have outdated knowledge, capabilities, and skills that are out of date with market trends That company's organization is also flawed According to Sorensen and Stuart (2000), the firm's uptime influences its performance 3.6 GDP growth rate of the country (Growth) GDP growth rate or simply growth rate of an economy is the percentage by which the real GDP of an economy increases in a period Thus, GDP is the result of all economic activities taking place in the territory of a country When an economy’s growth rate is positive, the economy’s output is increasing, and it is said to be in recovery or in economic boom But when the growth rate is negative, the economy is in a recession i.e output is contracting In the other word, sigh production output of enterprises means that enterprises use investment capital effectively, have abundant and highly qualified labor resources, and apply modern science and technology to production and business Thus, the high or low GDP growth rate of an economy reflects the production and business efficiency of enterprises in that economy 3.7 Inflation Inflation is a rise in prices, which can be translated as the decline of purchasing power over time The rate at which purchasing power drops can be reflected in the average price increase of a basket of selected goods and services over some period of time The rise in prices, which is often expressed as a percentage, means that a unit of currency effectively buys less than it did in prior periods The negative impact of inflation prevents business from operating normally because tax rates become meaningless in the face of hyperinflation The government's role in regulating the economy through money and taxes is also reduced, if not eliminated + The first negative impact is that inflation discourages long-term investments while stimulates short-term investment with speculative nature, causing scarcity of goods + Inflation weakens or even disrupts capital and credit markets, leading to difficulties in mobilizing borrowed capital of enterprises + Inflation raises the risk of debt default and raises the cost of servicing foreign debt in foreign currency of businesses and governments alike 3.8 Currency Policy Monetary policy is typically divided into three states: loosening, neutral, and tightening In a simple word, the neutral state of monetary policy is applied when the economy grows steadily at its potential level while inflation remains under control When the economy grows below its potential level, the loose state is used When the economy shows signs of hot growth above potential with high inflationary pressure, the tightening state is applied Monetary policy adjustments in the direction of loosening will have the effect of stimulating economic growth and business results, thereby positively affecting enterprise production and business efficiency, and vice versa CHAPTER RESEARCH OVERVIEW 4.1 International research Many researchers have studied and published on issues concerning the factors influencing business performance in general However, the factors affecting business performance of enterprises considered vary depending on the research objectives According to Indarti and Langenberg (2004), marketing, technology, and access to financial sources all have a favorable impact on the commercial success of small and medium-sized firms in Indonesia According to the findings of this study, business managers should focus on strengthening marketing techniques, technical innovation, and availability to financing for commercial activities Chittithaworn (2011) discovered eight factors influencing the business success of small and medium enterprises in Thailand, including: characteristics of small and medium enterprises, management and know-how, products and services, customers and markets, ways of doing business and collaboration, resources and finance, strategy, and external environment Simultaneously, Kamunge (2014) concluded that access to capital and managerial expertise are significant determinants impacting business performance in Limuru Town, Kenya Access to business information, access to infrastructure, and government laws and regulations all have a favorable impact on enterprise company success According to previous research, Philip's (2010) study in Bangladesh discovered that elements such as managerial capacity, goods and services, cooperation, resources, money, and business climate are critical to the success of small and medium firms in Bangladesh The regression analysis results suggest that products and services, company processes, managerial know-how, and the external environment are the most influential factors Despite the fact that the studies are done in various economies, the factors impacting firm efficiency are comparable In other words, Arshad and Arshad's (2019) study on the relationship between internal capacity and business performance of small and medium enterprises in Pakistan's textile and garment industry demonstrates that adaptability and operational efficiency have significant impacts on the business performance of small and medium enterprises Furthermore, Alshanty et al (2019) investigated the impact of market perception on the creative process, knowledge processing, and product innovation in small and medium enterprises in Jordan and found that an enterprise's ability to feel the market was critical for improving business performance, requiring them to invest in learning to improve business efficiency Udriyah (2019) conducted a survey on market orientation and innovation for competitive advantage and business efficiency of firms and found that market orientation and innovation accounted for 46.3% of competitive advantage, with the remaining 54.7% influenced by oscillations in other parameters This demonstrates that market orientation and innovation have substantial direct and indirect effects on corporate success through competitive advantage Chong et al (2019) investigated the internationalization and renewal of balanced score cards to assess the performance of Malaysian small and medium enterprises on knowledge and beliefs, commitment, and development opportunities, which could benefit the business performance of Malaysian enterprises According to these research, there are numerous elements impacting company performance, including internal and external aspects of the firm, owing to varied approaches to factors affecting business performance 4.2 Domestic research There have been several studies in Vietnam on the factors affecting the business performance of enterprises, such as Phuong (2016) study the efficiency of production and business activities of 180 companies listed on the Ho Chi Minh Stock Exchange Ho Chi Minh Her research is based on dependent variables: ROA and ROE; and the independent variables consist of (DE) capital structure, (TC debt management, (TANG) fixed asset investment, (RISK) business risk, SIZE, (GROWTH the growth rate, (AGE) the operating time of the enterprise Since then, the analysis results show that it is necessary to focus on building a reasonable capital structure, enhancing the efficiency of receivables management, rationally investing in fixed assets, accepting business risks, and increasing the size of enterprises streamlined, accelerate growth, and improve time-to-market efficiency Toan (2018) also conducts research on "Factors Affecting the Operational Performance of Vietnamese Commercial Banks." He employs two dependent variables, ROA and ROE, as well as ten independent variables: net interest margin (NIM), loan ratio (LDR), capital mobilization ratio (DEP), credit risk (CR), equity ratio (EA), bank size (BS), salary expense and other employee expenses (OVRE1), GDP, consumer price index (CPI), and average interest rate (BR) The model findings show that five factors, including NIM, OVER1, BR, GDP, and CPL, have a positive connection with ROA The influence of independent variables on ROA is 78.76%, with CR and EA having the reverse effect There are five variables of the same dimension in the model with the dependent variable ROE: NIM, OVERI, DEP, GDP, and CPI CR and EA both have the opposite effect These independent factors had an 83.72% influence on ROE At the same time, Huong and Nga (2018) research on factors affecting business performance enterprises with dependent variable ROA and independent variables: AGE (Time of business operation), AT (Total Asset Turnover), CR, CS (Capital Structure), ROS (Return on Sales) ), RT (Receivables Turnover), SIZE (Enterprise Size) The findings of this study have shed light on the relationship between the factors influencing the business performance of 154 construction firms listed on the Vietnam stock exchange Only 05 of the seven factors included in the research model have an impact on the business performance of these enterprises The capital structure factor has a negative impact on the Return on Assets, whereas the remaining four factors, which are: Total Asset Turnover, Receivables Turnover, Return on Revenue, and the business's operating time, have a positive impact on the rate of return on assets This result serves as the foundation for managers of construction enterprises listed on the Vietnamese stock exchange to use in developing policies to improve business efficiency CHAPTER RESEARCH METHODS 5.1 Proposed model Building three equations based on the above theory ROAi = α0 + α1*SIZEi + α2*DFLi + α3*CRi + α4*QRi + α5*CCCi + α6*AGEi + α7*GROWTHi + α8*INFLATIONi + α9*CP + Ei ROEi = β0 + β1*SIZEi + β2*DFLi + β3*CRi + β4*QRi + β5*CCCi + β6*AGEi + β7*GROWTHi + β8*INFLATIONi + β9*CP + Ui ROSi = γ0 + γ1*SIZEi + γ2*DFLi + γ3*CRi + γ4*QRi + γ5*CCCi + γ6*AGEi + γ7*GROWTHi + γ8*INFLATIONi + γ9*CP + Vi 5.2 Dependent variable In this study, I want to use common indexes to measure the efficiency of an enterprise's production and business is the rate of return on sales (ROS), the rate of return on total revenue assets (ROA) and return on equity (ROE) At the same time, these three variables also act as dependent variables in the research model 5.3 Independent variables From the theoretical bases and arguments above, the production and business efficiency of enterprises will be affected by the following factors, and this is also the independent variable in the research model: Enterprise size (Company Size), Leverage, Liquidity (Current Ratio and Quick Ratio), Cash Conversion Cycle, Company Age, speed GDP growth (Growth), Inflation, Currency Policy 5.4 Research hypotheses a) Company Size Previous studies have shown that firm size can predict the future stock price of the company itself (Simerly & Li, 2000) For example, Hvide and These (2007) in their study, they concluded that large-scale firms have better business performance Flamini et al (2009) argues that large firms have more competitive opportunities than small firms in exploiting economic resources, in transactions and achieving higher profits than small firms small-scale industry Almajali et al (2012) argue that the size of the firm can affect the financial performance in that firm The report of Liargovas and Skandalis (2008) argues that the larger firms they are, the more skilled they are because they already enjoy the benefits of learning, and it is not easy to make mistakes in a business environment The business is new and always changing, so the production and business activities of large-scale companies are more efficient However, Yuqi (2007) pointed out that in special cases large-scale enterprises will have a negative impact on business performance of enterprises In this study, we will focus on studying the impact of firm size on firm's revenue Hypothesis 1: H0: There is not a relationship between the size of the enterprise and the production and business efficiency of the enterprise H1: There is a relationship between the size of the enterprise and the production and business efficiency of the enterprise b) Leverage Leverage has a statistically significant impact on the financial results of firms This is supported by many previous studies (Liargavasand Skandalis, 2008; Kakani et al, 2005; Bashir, 2005; Neri 2001; Admms and Buckle, 2000) which stated that an increase in leverage has a positive effect to the efficiency of production and business Most previous studies have suggested that high leverage is beneficial for firms, because high leverage can improve management and encourage optimal investment On the other hand, companies with high leverage have a competitive advantage over those with low leverage Hypothesis 2: H0: Leverage has no relationship with business performance of enterprises H1: Leverage has relationship with business performance of enterprises c) Liquidity According to research by Liargovas, and Skandalis, 2008, a company's high solvency will help the company cope with unexpected situations and solve debt problems quickly From previous studies, this study makes the following hypothesis: Hypothesis 3: H0: Liquidity has no relationship with business performance H1: Liquidity has relationship with business performance d) Cash Conversion Cycle John Ananiadis and Nikos C.Varsakelis, 2008, Shaskia G Soekhoe, 2012 studied and used inventory turnover as a factor affecting production efficiency business Olufemi and Ajilore, 2009, Hasan Agan Karaduman, et al, 2010, Ahsen Saghir, et al, 2011, Faisal Shakoor, et al, 2012 indicated that the average collection time is one in factors affecting the productivity of an enterprise All the above studies show that Cash Conversion Cycle has an impact on business performance hypothesis 4: H0: Cash Conversion Cycle and business efficiency have no relationship with each other H1: Cash Conversion Cycle and business efficiency have relationship with each other e) Company Age The age of a business is measured by the number of years it has been in operation There are many different directions around the influence of operating time on the production and business efficiency of enterprises It can be a positive or negative correlation According to research by Chandrapala and Guneratne P172, 2012 when the business has a long operating time, it is easy to adapt to the size of the economy This means that the company can produce products at a lower cost, and this will increase sales and profits To confirm these statements more clearly, i put forward the following research hypothesis: Hypothesis 5: H0: There is not a relationship between operating time and business performance of enterprises H1: There is a relationship between operating time and business performance of enterprises f) Growth To measure the growth of the business, the most used expenditure in many studies is the growth rate of GDP This is also the indicator that we will use in this study to determine the correlation between business growth and business performance Hypothesis 6: H0: There is not a relationship between GDP growth and business performance of enterprises H1: There is a relationship between GDP growth and business performance of enterprises g) Inflation Moderate inflation stimulates the development of enterprises, too large inflation will limit the development of enterprises, creating many difficulties for businesses The input costs are so high that the finished product is difficult to sell that leads to inefficient production and business results So, from the above analysis, the author put forward the following hypothesis: Hypothesis 7: H0: Inflation has a positive effect on business performance of enterprises H1: Inflation has a negative effect on business performance of enterprises h) Currency Policy The government's monetary policy is a tool for the government to regulate capital Directing businesses to use capital more rationally and effectively Hypothesis 8: H0: Monetary policy has no a relationship with production and business efficiency of enterprises H1: Monetary policy has a relationship with production and business efficiency of enterprises CONCLUSION More efficient use of production resources is a pressing need for the economy as a whole and for businesses in particular Improving the efficiency of production and business activities is a meaningful goal for the stable development of enterprises in our country today in terms of economic benefits This project does not have the ambition to come up with the right solutions that truly positively affect the company's production and 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