Working Capital Management at Kuapa Kokoo Limited 1996-2005
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Date
2008-08-19
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Abstract
The profitability, growth and survival of a firm is influenced by many factors including socio-political , managerial and organizational. Some companies are inherently better placed than others and requirements and factors that affect their profitability ,growth and survival vary. Currently, not only are businesses expected to encounter the challenges of the world economic order of globalization and thus, competition but also they must be proactive in corporate resource allocation and management which play a significant role in corporate profitability and survival.
The research is focused on the extent to which the management of the components of Kuapa's working capital is related to the profitability and survival of the company from 1996 to 2005.
Secondary data including annual reports and audited accounts of Kuapa Kokoo for the years were the main sources of data for the study. Scheduled in-depth interviews were also used to collect primary information on the strategies employed by the company in managing its working capital The primary data collected were used in explaining the secondary data and were analysed quantitatively by examining the trends and relationships of the components of working capital and profitability aided by the use of SPSS computer software.
The study revealed that there is a strong relationship between working capital management represented by the cash conversion cycle (CCC) and profitability of Kuapa
Kokoo and that the longer stocks are kept , debts remain uncollected; the lower the profitability of the company, and also decreasing the CCC by delaying payments to creditors increases profitability.
Though, the company had formal working capital management strategies including cash budgeting, it had persistently faced liquidity problems for the last seven years of the ten year study period.. Also, there is the need for improvement in the financial planning and control devices of the company as well as restructuring the existing overdraft and short term loan facilities into medium and long term loans.
Description
A dissertation submitted to Department of Accounting and
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Finance, School of Business, Kwame Nkrumah University of
Science and Technology in partial fulfilment of the requirement for the award of
Degree of Master of Business Administration, 2008