THE EFFECT OF WORKING CAPITAL MANAGEMENT ON FIRMS PROFITABILITY: A STUDY OF LISTED MANUFACTURING FIRMS ON THE GHANA STOCK EXCHANGE

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Date
NOVEMBER, 2015
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Abstract
Working capital is the backbone of each firm and on the off chance that it is productively overseen٬ it gets to be useful to the firm in light of the fact that it has an immediate effect on company's benefit. Working capital management is an important part of financial management and its primary task is concerned with the matching of asset and liability movements over time. The study of the effect of different variables on working capital management was used and this includes Average collection period, Average payment period, inventory turnover in days, Cash conversion cycle, Debt ratio, Current ratio and the Size of the firm on Return on Total asset as dependent variable of Ghanaian firms. Correlation and Regression were used for the analysis and the results showed that there is a negative relationship between profitability and, the number of day’s account receivables and the number of days account payable. However, the study found a positive relationship amongst the number of days of inventory the cash conversion period and profitability for the selected manufacturing firms in Ghana. Besides, the study found that current ratio and the size of the firm affects profitability positively. Some of the recommendations suggested were that, manufacturing firms should implement policies or strategies aimed at ensuring that the number of days of account receivables is shortened in order to enhance on their profitability levels. Likewise, manufacturing firms ought to attempt to pay their obligation commitments on time with a specific end goal٬ to abstain from sending terrible signs to the business that organizations have some budgetary issues and it may go bankrupt٬ resultantly its goodwill will be ruined and the estimation of its shares will go down which may influence their operations.
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A Thesis submitted to the Department of Accounting and Finance, Kwame Nkrumah University of Science and Technology in partial fulfilment of the requirements for the degree of Master of Business Administration (Finance Option)
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