Working capital always being disregard in financial decision making since it involve investment and financing in short term period. However, it is an important component in firm financial management decision. An optimal working capital management is expected to contribute positively to the creation of firm value. In order to reach optimal working capital management firm manager should control the trade-off between profitability and liquidity accurately. The purpose of this study is to examine the effect of working capital management on firm’s performance of Malaysian manufacturing companies in industrial-product and consumer-product sector. This study was conducted on 248 manufacturing companies listed in Bursa Malaysia Main Market which cover a period of one (1) year which is 2016. Furthermore, this study also used secondary data in which the data was derived from annual financial report of the manufacturing companies. The dependent variable which is firm’s performance was measured by return on asset and for the independent variable which consists of cash management, inventory management, account receivable management and account payable management were measured by cash conversion cycle, inventory turnover days, receivable turnover days and payable turnover days respectively. Other than that, this study also used control variable which is firm’s size which measured using company’s total asset. This study used mean and standard deviation in order to examine the level of firm’s performance based on return on asset and it found that there is a moderate level of firm’s performance among manufacturing companies in Malaysia. Multiple regression and correlation analysis were carried out on the data to determine the relationships between components of working capital management and the firm’s performance. This study found that the relationships were negative between cash management, inventory management, account receivable management and account payable management with firm’s performance. Unfortunately, the relationship is not significant which can be said that all these variables do not influence the firm’s performance. The surprising results might be due to numbers of factors such as the characteristic of the manufacturing companies involved in the study and the working capital management policy employed by the company. Majority of the manufacturing in Malaysia companies are a bit relax in their working capital management which can expose company to higher risk to become bankrupt if it is not manage properly.
