Effect of excess working capital, accounts payable and operating capital on investment and financing pattern of firms in ghana

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Over the last decade, researchers have examined a number of different approaches to working capital management at various businesses. Several Ghanaian banks have merged or closed as a result of the global financial crisis and the subsequent cleanup of the country's financial sector. The study's goals were to draw conclusions about the implications of the Excess Net Working Capital to Sales ratio and the Net Trade Cycle for publicly traded companies on GSE, as well as to determine the impact of these ratios and cycles on the investment and financing decisions of enterprises (both small and large). This study looked specifically at Ghanaian manufacturing firms that are publicly listed. The nine companies included in this study were chosen at random from the pool of candidates. Additional details were gleaned from the company's yearly reports. The data was compiled using a variety of sources, including company annual reports from 2011 to 2021, information from the Bank of Ghana's website detailing the performance of the Ghana Stock Exchange (GSE), and other materials. Both a Static model and a Dynamic model were used to estimate the parameters of interest to the investigation. An ENWCSR of 1.287 indicates that WCM activities are, on average, inefficient. The study uses both static and dynamic methods to estimate working capital's entire effect. When looking at the impact of WCM practises on manufacturing businesses, the authors found the expected result that excess ENWCSR had a detrimental effect on investments in physical assets. The ability of a business to undertake long-term capital expenditures is shown to decrease when working capital rises relative to the average of its industry. There is evidence to suggest that enterprises with a higher net trade cycle have a lower level of fixed assets, which may mean they are prioritising the acquisition of assets with a shorter lifetime over those with a longer one, and therefore are missing out on the opportunity to maximise their profits over the long run. A decrease in return on investment might be expected as the time it takes to collect payments from clients increases. According to these results, increasing investment activity in Ghana's industrial sector requires careful management of working capital.
A thesis submitted to the department of accounting and finance, kwame nkrumah university of science and technology, kumasi in partial fulfillment of the requirement for the award of a master of science degree in accounting and finance