College of Bussines and Economics

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College of Bussines and Economics

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    IMPACT OF WORKING CAPITAL MANAGEMENT ON PROFITABLITY: EVIDENCE FROM SELECTED MANUFACTURING COMPANIES IN SNNPRS, ETHILOPA.
    (wolkite university, 2019-01) Abiyot Gossaye Teka
    Working capital management is the administration of current assets and current liabilitiesand it is directly affects the liquidity and profitability of company. Hence, efficient workingcapital management involves excessive planning and controlling and it is very important toequalize between current assets and current liabilities to eradicate the risk of insolvency.The objective of this study is to examine the impact of working capital management onfirms’ profitability and review the statistical significance between components of working capital management. In light of this aim the thesis implement quantitative method of research approaches to test the study hypothesis. Hence, the study used survey of companies audited financial statements. The purposive sampling method was used. Consequently, the study selected a sample of 11 companies for the period of eight years(2010-2017). Data was analyzed on quantitative basis using descriptive and regression analysis (Pooled ordinary least square) method was used. It observe the components of working capital for instance accounts receivable management, inventory holding period, accounts payable period, and cash conversion cycle in relation to ROA. In addition the study observes current ratio, company size, company growth and debit ratio as control variables. The key results from the study are; a negative significant at 5 percent relationship between account receivable management and profitability. Cash conversioncycle have a negative and statically significant at 5 percent relation with profitability. Opposed to the research hypothesis, account payable period has a negative statically significant at 5 percent relation with profitability. The manufacturing company of SNNPRS ,Ethiopia managers can increase profitability of their firms by limiting the time gap between company’s expenditure for purchases of raw materials and the collection of sales of finished goods. In general the study recommended that firms should minimize working capital management components in order to maximize profitability.