The relationship between working capital management and profitability for Malaysian industrial products sector

• Main Authors: Zulkifli, Azyan, Alifiah, Mohd Norfian
• Format: Conference or Workshop Item
• Published: 2015
• Subjects: HD28 Management. Industrial Management
• Online Access: http://eprints.utm.my/id/eprint/62020/; https://conferencealerts.com/show-event?id=146588
• Institution: Universiti Teknologi Malaysia

This paper attempts to investigate the relationship between working capital management and profitability in the industrial product sector listed in Bursa Malaysia. The data is retrieved from DataStream for companies that have complete financial statement for 11 year period from 2000 to 2010. There are 136 companies listed in the industrial products sector. However, only 72 companies meet the requirements to be used as samples in this study. The study aims to determine the relationship between working capital management, i.e. current ratio (CR) and net trade cycle (NTC) and firms’ profitability, proxied by return on asset (ROA) and return on equity (ROE). Based on Pearson correlation analysis, the findings showed negative relationship between NTC with ROA and ROE. However, the findings showed a positive significant relationship between CR with ROA and ROE. Keywords: Working Capital Management, Profitability, Current Ratio, Net Trade Cycle, Return on Asset and Return on Equity.