The Impact of Internal Control System and Working Capital Management on Financial Performance at Supermarket in Dili, Timor-Leste

Alexandre Fernandes Cham; Teresa Freitas Belo; Alvaro Menezes Amaral

doi:10.51703/bm.v5i0.143

Alexandre Fernandes Cham Master of Business Administration (MBA), Graduate School, Dili Institute of Technology
Teresa Freitas Belo Master of Business Administration (MBA), Graduate School, Dili Institute of Technology
Alvaro Menezes Amaral Master of Business Administration (MBA), Graduate School, Dili Institute of Technology

DOI: https://doi.org/10.51703/bm.v5i0.143

Keywords: Internal control system, working capital management, financial performance

Abstract

The objective of this study was to investigate the relationship between internal control and capital management systems on financial performance. The study was carried out using a sample of 50 supermarkets in Dili, and the participants were owners or managers of these supermarkets. Data was collected using a questionnaire, and the Multiple Linear Regression technique was employed to analyze the data and test the hypotheses using SPSS 21. The study reveals that the internal control system (measured by environmental control indicators, activity control, and risk assessment) and working capital management (measured by stock management, credit management, cash management, and debt management) have a significant positive impact on the financial performance of supermarkets in Dili, Timor-Leste. The findings suggest that effective implementation of an internal control system and efficient management of working capital can enhance the financial performance of supermarkets. However, the study also indicates that the information system indicator within the internal control system does not have a significant impact on the financial performance of supermarkets in Dili, Timor-Leste. The findings of this study are valuable for advancing research on internal control systems in supermarkets in developing countries. Specifically, the study examines the impact of environmental control indicators, activity control, information systems, risk assessment, and working capital management (as measured by stock management indicators, credit management, cash management, and debt management) on financial performance (as measured by profitability, ROE, and liquidity). The study highlights the importance of effective internal control systems and working capital management in improving financial performance in supermarkets. However, the study is limited in that it relies solely on a questionnaire for data collection. Future research should consider using interviews to obtain more reliable and valid data.

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