Working Capital, Cash Generation, and Profitability: The Role of Leverage in Indonesian Consumer Noncyclical Firms

Amin Wijoyo; Ferry Adang; A Amiruddin; Syarifuddin Rasyid

doi:10.58905/apollo.v5i1.822

Authors

Amin Wijoyo Faculty of Economics and Business, Universitas Tarumanagara, Jakarta, Indonesia
Ferry Adang Faculty of Economics and Business, Universitas Tarumanagara, Jakarta, Indonesia
A Amiruddin Faculty of Economics and Business, Universitas Hasanuddin, Makassar, Indonesia
Syarifuddin Rasyid Faculty of Economics and Business, Universitas Hasanuddin, Makassar, Indonesia

DOI:

https://doi.org/10.58905/apollo.v5i1.822

Keywords:

Cash conversion cycle, Sales growth, Operating cash flow, Leverage, Profitability, Panel data

Abstract

This study examines the associations of the cash conversion cycle (CCC), sales growth, operating cash flow, and leverage with profitability, including leverage as a moderator, in Indonesian consumer noncyclical firms. From an initial population of 133 firms, purposive screening yields a balanced panel of 79 listed firms and 395 firm-year observations for 2021–2025. Firm fixed-effects regressions are estimated in a baseline model and a nested CCC–leverage interaction model. In the baseline model, CCC is not statistically associated with return on assets (ROA; p = 0.7071), while sales growth (p = 0.0177) and operating cash flow scaled by assets (p = 0.0010) have positive associations and the debt-to-assets ratio has a negative association (p < 0.0001). In the interaction model, the CCC × leverage coefficient is positive but statistically insignificant (b = 0.000129; p = 0.4337), contrary to the hypothesized negative interaction. The nested-model partial F test agrees with the squared interaction t statistic within rounding precision. Sales growth and operating cash flow are no longer significant when the interaction is included. The findings do not support an independent linear CCC association or leverage moderation in this sample. Conclusions are limited by conventional standard errors, extreme financial ratios, possible accounting-measurement overlap, and omitted calendar-year effects.

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