Abstract:
The study employs fixed effect model, random effect and pooled OLS to understand the impact between
variables and fixed model is selected as appropriate to analyse variables. Operating Profit Margin
(OPM) is the dependent variable while Cash Conversion Cycle (CCC), Days Inventory Outstanding
(DIO), Days Sales Outstanding (DSO), Days Payables Outstanding (DPO), Current Ratio (CA) are
considered as the independent variables with control variables such as AGE, SIZE and Leverage
(LEV). The findings reveal that higher DIO reduces profitability, while better management of DPO
and CR positively impacts OPM. Larger firms benefit from economies of scale and better liquidity
enhances profitability. The study also DSO and firm age do not directly affect the profitability,
suggesting that other factors, like cost management might be more critical. Additionally, LEV does
not show a significant impact on profitability, emphasizing the need for cautions debt structuring.
These insights provide practical guidance for financial managers in optimizing working capital
management to enhance firm performance. Academics and researchers can also leverage the findings
of this study for future research. Additionally, regulatory bodies should establish a robust framework
to ensure the smooth functioning of firms.
