THE IMPACT OF WORKING CAPITAL MANAGEMENT ON FINANCIAL PERFORMANCE: A STUDY OF OIL AND GAS BUSINESSES LISTED ON THE BURSA MALAYSIA

Abstract

This study examines the relationship between working capital management and financial performance, specifically how the Cash Conversion Cycle, Account Receivable ratio, and Inventory affect Return on Assets. Only the top ten companies were chosen from a sample of 38 companies listed on the Bursa Malaysia from 2017 to 2021. Due to the limited sample size, the data is analysed using descriptive, histogram, and non-parametric methods. The results demonstrate that there is a correlation however, there is no significant relationship between the variables (Inventory Turnover Ratio, Cash Conversion Cycle Ratio, and Inventory Ratio) and Return on Assets. Though the results are insignificant, it can be observed that the cash conversion cycle, inventory cycle days, and accounts receivable period have little influence on profitability. The findings provide insights to industry experts, academics, and financial managers to design effective working capital management in cash flow optimization, cost reduction and liquidity enhancement.