A comparative study of the working capital policies of Goil and total company limited, Ghana.
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Date
2016-08
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KNUST
Abstract
The study mainly aimed at investigating the trend of inventory conversion period,
receivables conversion period, payables deferral period, cash conversion cycle as a
measure of working capital management and the working capital management strategy
being followed by GOIL and Total Petroleum Ghana. The study mainly used secondary
source of data studying the financial statements for a five year period from 2011-2015.
The study revealed that GOIL had an average inventory conversion period of 5.76 days
with receivables conversion period of 40.78 days. The payables deferral period was
53.87 days. Total Petroleum Ghana also had 4.36 days, 42.78 days and 53.15 days
respectively for inventory, receivables and payables conversion periods. A negative
cash conversion cycle was recorded both GOIL and Total Petroleum Ghana. The main
types of products offered by GOIL are fuels and special products. Total Petroleum
Ghana offers these same products apart from liquefied petroleum gas (LPG). The main
customers of the companies were identified as dealers, consumers and resellers while
the main suppliers are TOR, chase petroleum and Cyrus. The average current asset to
total assets ratio for GOIL was 0.65 while that of Total Petroleum Ghana was 0.68.The
current liability to total assets ratio was averagely 0.70 for GOIL whilst that of Total
Petroleum Ghana was 0.68. Total Petroleum Ghana pursued a conservative and
aggressive (mixed) working capital management policy (investment and financing
respectively) due to its percentage of commitment of current assets and current
liabilities to total assets. Similarly, GOIL pursue same strategies in terms of financing
and investment policies but slightly ahead of Total.
There are significant differences in the cash conversion cycles of two companies.
However, there are no significant differences in the working capital management
strategy or policy pursued by the two oil marketing companies listed on the stock
exchange. The study recommended that the companies reduce the payables deferral
periods in order to enjoy some trade discounts. Again, future research should look at
more than one company for a longer period of time so that a regression analysis
conducted to determine the effect of working capital management on profitability of
firms.
Description
A Thesis Submitted To Department Of Accounting And Finance In Partial Fulfilment Of The Requirements For The Degree Of Masters Of Business Administration (Finance- Option)