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Working Capital Managemenr

In: Business and Management

Submitted By msishipra
Words 5695
Pages 23
Agyemang Badu Ebenezer Lecturer, Department of Business Administration Presbyterian University College, Ghana Michael Kwame Asiedu Lecturer, Department of Business Administration Presbyterian University College, Ghana ABSTRACT This study examines the effect of working capital management on the profitability of companies listed on the Ghana Stock Exchange. Secondary data from the Ghana Stock Exchange on manufacturing companies within the Accra metropolis was used to examine whether working capital management influence the profitability of manufacturing companies in the country. The study found out that, the major component of working capital management such as inventory days, account payable and cash conversion cycle have influence on the profitability of manufacturing companies. The study recommended that, manufacturing companies should adopt efficient and effective ways of efficiently managing these components of working capital management. KEY WORDS: Working capital management, profitability, net operating profit 1.1 INTRODUCTION Working Capital Management has become very important in financial management because of its effects on the firm’s profitability, risk and consequently its value. There are several important reasons why the management of working capital is important to both small and large organisations. (Smith, 1980). A well designed and implemented working capital management policy is expected to contribute positively to the creation of a firm’s value. (Padachi, 2010). Current assets of many companies, accounts for over half the total assets and are even higher in the companies in the distribution sector. (Horne and Wachowicz, 2009). However, a company is required to maintain a balance between liquidity and profitability while conducting it...

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