Working capital management and leverage to profitability: case of manufacturing firms in Indonesia

This study aims to investigate whether Working Capital Management (WCM) and leverage affect firm profitability. Data concern was gathered from Bloomberg database terminal. Sample is manufacturing companies listed in Indonesian Stock Exchange (IDX) over the period of 2014 – 2020, which already established for some time. WCM is measured by using Cash Conversion Cycle (CCC), profitability is proxied with ROA while leverage is proxied by Debt-to-Equity. Panel data regression using random effect model is utilized to test hypotheses. Result shows that CCC has no significant relationship with profitability, it implies that the length of CCC days does not affect profitability. Leverage affects negatively and growth positively profitability performance, the higher the proportion of debt to equity will lower profitability, on the other hand, the higher sales growth will enhance better firms’ profitability performance. Our findings contribute to understanding of the relationship of CCC and leverage on profitability of manufacturing firms in emerging markets.