AN EMPIRICAL EVIDENCE OF THE IMPACT BETWEEN WORKING CAPITAL MANAGEMENT AND FIRM’S PROFITABILITY (NPM) AMONG MALAYSIAN FMCG SECTOR

Abstract

The purpose of this study is to denote the previous studies by providing significant evidence of the impact of working capital management on a firm’s profitability in Bursa Malaysia in the years 2015-2020. There is a 108 sample size being selected in this study. The study concerns the Malaysian FMCG sector. The methods implemented in this study are correlation analysis, multiple
regression analysis, autocorrelation analysis and multicollinearity analysis. By performing these tests, this study found that cash conversion cycle (CCC), current ratio (CR), and receivable turnover ratio (RTO) has no significant relationship towards NPM. This indicates that these three variables do not affect profitability. Meanwhile, inventory turnover ratio (ITO) and payable turnover ratio (PTO) consist of a positive significant relationship towards firm’s profitability. The findings of the study are consistent with Hirigoyen’s hypothesis where liquidity and profitability have a positive relationship. This study suggests increasing the sample size of the study to verify whether the findings for CCC, CR, RTO will be changed.