The relationship between working capital management, leverage and firm's profitability: evidence from listed consumer product companies in Malaysia / Siti Masturah Abdul Sanih

The main focus of this research is to investigate the relationship of average collection period, inventory conversion period and average payment period and debt ratio on profitability which consists of 90 consumer product companies listed in Bursa Malaysia from year 2008 until 2016. The data collected were analysed using the panel data statistical software Average Collection Period, Inventory Conversion Period, Average Payment Period and Debt Ratio are the independent variables and profitability in a proxy of return on asset is the dependent variable. The result in this study reveals that debt ratio has a significant negative relationship with profitability of the firms. This result indicates that firms should minimize their debt in order to have higher profitability. However, the inventory conversion period indicate a positive insignificant relationship with firms’ profitability. It is suggested that consumer product companies in Malaysia should try to collect money from their respective customers faster, payment of the bills should be made as soon as possible and try to minimise the gap from collecting the debt from the customers.