Working Capital Management and Company Performance: The Empirical Study on Consumer Goods Industry listed in Indonesia Stock Exchange

- Consumer goods industry in Indonesia is one of the rising stars. In line with the economic growth, consumer goods as one of the business that support economic growth in Indonesia, the chance that it will keep raising is very high as the population and consumption grows. Along to make this breakneck growth possible and profitable, they have aggressively built nation scale along every part of the value chain. Working capital management is considered as critical element for the company performance to define the organizations’ performance while conducting day-to-day operations. This research is expected to delineate how significant is the influence of working capital management in consumer goods industry’s company performance and how was the working capital management has been conducted in consumer goods industry in Indonesia. The study took the data from the annual reports of 26 companies in related industry during the year 2007-2012. Using four models to measure the effect of working capital management on profitability, the result shows that in general working capital management has significant impact on company’s profitability. However, the way it worked in Indonesia’s consumer goods industry is different with that in the theories. Collection period and inventory turnover show a significant positive relationship with operating profitability, while payment period has no significant influence on profitability. These anomalies have made cash conversion cycle ineffective in affecting companies’ profitability.