Effects of Working Capital Management On Profitability of Manufacturing Firms Listed in Nairobi Securities Exchange, Kenya (Published)
This study examined effect of working capital management on profitability containing twenty manufacturing firms listed in Nairobi securities exchange. Kenya’s manufacturing sector has been hit by poor working capital management leading to unstable profits. Despite various scholars conducting studies concerning Kenyan manufacturing firms’ working capital, lack of consistence revenues require further examination on what causes these deviations. Current study was piloted by following specific objectives; Influence of inventories, receivable, payable, and cash managements on profitability of manufacturing firms. Theories that guided this study were: agency, transaction cost, and cash conversion cycle. Descriptive statistics was used on analysis especially, minimum, maximum, mean and standard deviation. Mathematical data evaluation involved inferential statistics. In addition, study model quantitative data was presented in tables. The study accepted census sampling method for collecting secondary data from population of 20 companies listed for five years from 2016 to 2020. Secondary details were found in financial statements of manufacturing firms and Nairobi Securities Exchange. Data was collected using checklist. The study recommended that manufacturing companies should estimate desirable quantity of working capital and concluded that increased working capital should match increased expenses, sales and revenue.
Keywords: Kenya, Manufacturing Firms, Nairobi Securities Exchange, Profitability, Working Capital Management
Working Capital Management and Profitability of Industrial Goods Sector in Nigeria (Published)
This study investigated the relationship between working capital management and profitability of industrial goods sector in Nigeria. Specifically, the variables of working capital management namely: Cash Conversion Cycle (CCC), Current Ratio (CR), Quick Ratio (QR) and Working Capital Turnover ratio (WCTR) and Return On Assets (ROA) were examined. Firms in the industrial goods sector were selected and their data sourced from the Nigerian Stock Exchange Factbook (2011-2020) and seventy (70) observations were obtained. The study revealed from the regression analysis carried out that a positive linear relationship exist between the variables of working capital management (CCC, CR, QR and WCTR) and ROA. CR was negatively and significantly related with ROA while, CCC and QR was positively but insignificantly related with ROA.WCTR shows a negative and insignificant relationship with ROA when tested at 0.05 level of significance. Based on the findings, it is recommended therefore, that listed industrial goods firms should adopt the management of their short term financial strength in boosting profitability.
Keywords: Profitability, Working Capital Management, current ratio, industrial goods
Effect of Cash Conversion Cycle and Inventory Holding Period on the Profitability of Small and Medium Enterprises in Wote, Makueni County (Published)
This study examined influence of working capital management practices on the profitability of small and medium sized enterprises in Makueni County. A cross-sectional survey research design was used. A sample of 50 small and medium sized enterprises from Wote town was used. The financial statements for 2012-2016 were used to generate secondary data while semi-structured questionnaires were used for primary data collection. Descriptive statistics of frequency, means and standard deviation were used while the results were presented in tables. The study aimed at finding out the relationship between profits of the small and medium enterprises and inventory turnover, receivables, cash management and payables. The findings indicated that there exist a positive but not significant relationship between cash conversion cycle and profitability, while inventory-holding period has a positive and significant effect on profitability. The study recommends an improvement on the cash conversion cycle and use of the findings for developing policies for improvement since small and medium enterprises are key contributors to the Gross Domestic Product of the country.
Keywords: Cash conversion cycle, Small and Medium Enterprises, Working Capital Management
Working Capital Management and Firm Profitability During and After the Economic Crisis among Malaysian Listed Companies (Published)
The main aim of this paper is to explore the working capital management components and examine their relationship with firm profitability among Malaysia listed companies during and after the global financial crisis of 2008-2009 and 2012-2013. Based on the descriptive results, Malaysian firms practice conservative working capital management techniques due to the fact that current ratio is high and debt ratio is low compared with prior studies.The multiple regression analysis on the 260 listed Bursa Malaysia companies shows a negative relationship between working capital management components (i.e. average collection period and average payment period) and firm profitability during and after the crisis periods. Moreover, cash conversion cycle negatively relates with firm profitability after the crisis. Inventory turnover days indicate a positive and significant relation with firm profitability during the crisis period. These findings suggest that Malaysian firms should try and collects cash from customers faster, pay bills as soon as possible and minimise the gap between initial investment and the time cash is collected from customers during both crisis and non-crisis periods. Nevertheless, management should maintain considerable level of stock to avoid shortage and supply interruption during the crisis
Keywords: Malaysia, Profitability, Working Capital Management
The Impact of Working Capital Management on Corporate Performance: Evidence from Listed Non-Financial Firms in Ghana (Published)
Working Capital Management (WCM) plays a significant role in the successful operation of businesses due to its significant effect on corporate profitability and liquidity. This study empirically examines the impact of working capital management on the performance of non-financial firms in Ghana. Using secondary data of five listed non-financial firms for the period 2010-2015, the Random effect model was employed to establish the relationship that exists between the various components of working capital management and firm performance and whether these WCM components impact significantly on firm performance. The results show that average payment period and current ratio have a positive relationship with firm performance. Average collection period, inventory turnover, cash conversion cycle, and firm size on the other hand have a negative relationship with firm performance. However, only average collection period, average payment period, cash conversion cycle, and current ratio are found to have a significant impact on firm performance. The study recommends that managers of non-financial firms in Ghana should formulate sound working capital management policies that will enable firms to deal with liquidity challenges and enhance their performance.
Keywords: Non-financial firms, Performance, Working Capital Management
EFFECTIVE WORKING CAPITAL MANAGEMENT AND THE PROFITABILITY OF QUOTED BANKS IN NIGERIA (Published)
This study examines the effects of working capital management on the profitability of Deposit Money Banks (DMBs) quoted on the Nigerian Stock Exchange for single period of year 2013. The paper adopts Returns on Equity (ROE) and Returns on Assets (ROA) as dependent variables for profitability while Current ratio (CRR), Profit before taxation to current liabilities (PCL), Operating cash flow to current liabilities (OCL) and Cash balance to total liabilities (CTL) are proxies for working capital and as well independent variables. The annual account and report of all the eleven banks quoted on the Nigerian Stock exchange as at 2013 served as the sources of data, regression was used to determine the relationship between the dependent and the independent variables, and the study finds that significant and positive relationship exist between the working capital management and the profitability of the DMBs in Nigeria. The findings indicate that the two profitability proxies are positively affected by all the elements of working capital management. The paper noted variety of components of working capital and profitability; this therefore means that banks are to ensure that appropriate management of working capital is essential for achieving its objective of maximizing the profitability.
Keywords: Deposit Money Banks, Profitability, Working Capital Management
IMPACT OF WORKING CAPITAL ON THE PROFITABILITY OF THE NIGERIAN CEMENT INDUSTRY (Published)
This study empirically examined the impact of working capital management (Measured by: the number of days accounts receivable are outstanding-DAR, the number of days inventory are held-DINV, and the cash conversion cycle-CCC), on profitability (measured by return on assets-ROA) of Nigerian Cement Industry for a period of eight (8) years (2002-2009). Data from a sample of four (4) out of the five (5) cement companies quoted on the Nigerian Stock Exchange (NSE) were analysed using descriptive statistics and multiple regression analysis. The study found an insignificant negative relationship between the profitability (measured by ROA) of cement companies quoted on the NSE and the number of days accounts receivable are outstanding (DAR). The study also found a significant negative relationship between the profitability of these cement companies and the number of days inventory are held (DINV). The study finally revealed a significant positive relationship between the profitability and the cash conversion cycle (CCC). The study concludes that, the profitability of cement companies quoted on the NSE during the study period is influenced by DINV and CCC. The study therefore recommends that managers of these cement companies should manage their working capital in more efficient ways by reducing the number of days inventory are held to an optimal level in order to enhance their profitability as well as create value for their shareholders. Managers of Nigerian cement companies should also improve on their cash flows, through the reduction of their cash conversion cycle
Keywords: Accounts receivable, Cash conversion cycle, Inventory., Nigerian Cement Industry, Profitability, Working Capital Management
WORKING CAPITAL MANAGEMENT AND PROFITABILITY OF SELECTED QUOTED FOOD AND BEVERAGES MANUFACTURING FIRMS IN NIGERIA (Published)
The main objective of this research was to investigate the relationship between working capital management and profitability of food and beverages manufacturing firms listed on the Nigerian Stock Exchange. The study used secondary data of 120 firm-year observationsbetween 2002 and 2011. Survey research design was adopted. The data were analysed using Descriptive Statistics, Correlation Analysis and Multiple Regression Analysis.The variables for this study were categorized into three: Dependent variables (Net Operating Profit), independent variables (Working Capital Management), and control variables. The study found that there is relatively strong positive and significant relationship between Working Capital management and Net Operating Profit and that a positive but insignificant relationship exist between Cash Conversion Cycle and Net Operating Profit. Also, Account Collection Period has significant negative relationship with Net Operating Profit while Inventory conversion Period and Account payment period have insignificant negative relationship with Net operating profit of food and beverages manufacturing companies in Nigeria
Keywords: Cash conversion cycle, Correlation Analysis, Net Operating Profit, Quoted Food and Beverages Firms, Working Capital Management
Impact of working capital on the profitability of the Nigerian cement industry (Review Completed - Accepted)
This study empirically examined the impact of working capital management (Measured by: the number of days accounts receivable are outstanding-DAR, the number of days inventory are held-DINV, and the cash conversion cycle-CCC), on profitability (measured by return on assets-ROA) of Nigerian Cement Industry for a period of eight (8) years (2002-2009). Data from a sample of four (4) out of the five (5) cement companies quoted on the Nigerian Stock Exchange (NSE) were analysed using descriptive statistics and multiple regression analysis. The study found an insignificant negative relationship between the profitability (measured by ROA) of cement companies quoted on the NSE and the number of days accounts receivable are outstanding (DAR). The study also found a significant negative relationship between the profitability of these cement companies and the number of days inventory are held (DINV). The study finally revealed a significant positive relationship between the profitability and the cash conversion cycle (CCC). The study concludes that, the profitability of cement companies quoted on the NSE during the study period is influenced by DINV and CCC. The study therefore recommends that managers of these cement companies should manage their working capital in more efficient ways by reducing the number of days inventory are held to an optimal level in order to enhance their profitability as well as create value for their shareholders. Managers of Nigerian cement companies should also improve on their cash flows, through the reduction of their cash conversion cycle
Keywords: Accounts receivable, Cash conversion cycle, Inventory., Nigerian Cement Industry, Profitability, Working Capital Management