The effect of working capital management on profitability of the consumer products and services sector in Malaysia / Alia Nabilah Ahmad Puad

Profitability is one of the most significant aspects of company performance, shareholder satisfaction, investor attraction, and long-term viability. However, in order to achieve higher profitability, a company must have efficient working capital management. Many studies have been conducted on working capital management as it helps maintain smooth operations. Thus, it enhances the company's profitability. This paper provides insights into the effect of working capital on the profitability of the consumer products and services sector in Malaysia. This study used data from 20 publicly listed companies in Bursa Malaysia for five years from 2016 to 2020. The dependent variable in this study is a return on asset (ROA), which is a proxy for profitability. The number of days accounts receivable (AR), the number of days accounts payable (AP), and the cash conversion cycle (CCC) are used as independent variables to represent working capital management. The results show that the number of days accounts receivable is significant affecting profitability. However, the other two variables are showing an insignificant negative relationship with profitability.