Effect of Working Capital Management on Profitability of Listed Manufacturing Companies in Ghana

Jacob Akomeah; Siaw Frimpong

doi:doi:10.11648/j.ijfbr.20190502.13

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Effect of Working Capital Management on Profitability of Listed Manufacturing Companies in Ghana

Jacob Akomeah, Siaw Frimpong

Published in International Journal of Finance and Banking Research (Volume 5, Issue 2)

Received: 31 March 2019 Accepted: 15 May 2019 Published: 26 June 2019

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Abstract

Working capital management plays a vital role in the success of businesses because of its effect on profitability. The purpose of this study is to examine the effect of working capital management on the profitability of listed manufacturing firms in Ghana. The study used secondary data collected from seven (7) manufacturing firms listed on the Ghana Stock Exchange for a period of ten years (2005-2014). The profitability as dependent variable was measured in terms of gross operating profit. The working capital was determined by Accounts Receivables Period, Accounts Payables Period, Inventory Conversion Period and Cash Conversion Cycle are used as independent variables. Moreover, current ratio used as liquidity indicator and firm size as measured by logarithm of sales are used as control variables. Data was analysed using the Fixed-Effects model of the Panel data regression. The regression results revealed that account receivables period (ARP) and inventory conversion period (ICP) days had a statistically significant negative impact on the profitability whiles account payables period (APP) days had insignificant positive effects on the profitability. The study, on the other hand found out that cash conversion cycle (CCC), current ratio (CR), and firm size (LOS) had a significant positive impact on the profitability. The study recommended that manufacturing firms should adopt efficient and effective ways of managing these components of working capital management.

Published in	International Journal of Finance and Banking Research (Volume 5, Issue 2)
DOI	10.11648/j.ijfbr.20190502.13
Page(s)	29-35
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Working Capital Management, Profitability, Ghana Stock Exchange, Fixed Effect, Random Effect

References

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[4]	Laughlin, E. J., & Richards, V. D. (1980). “Cash conversion cycle approach to liquidity analysis.” Financial Management Association International, 9(1), 32-38.
[5]	Falope, O. I., & Ajilore, O. T. (2009). Working capital management and corporate profitability: evidence from panel data analysis of selected quoted companies in Nigeria. Research Journal of Business Management, 3, 73-84.
[6]	Lazaridis, I., & Tryfonidis, D. (2006). Relationship between working capital management and profitability of listed firms in the Athens stock Exchange, Journal of Financial Management, 19. 26-35.
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[8]	Mathuva, D. M. (2010). The Influence of Working Capital Management Components on Corporate Profitability: A Survey on Kenyan Listed Firms. Research Journal of Business Management, 4(1): 1-11.
[9]	Stephen, K. K. (2012). Analysis of Effects of Working Capital Management on Profitability of Manufacturing Companies: A Case Study of Listed Manufacturing Companies on Nairobi Securities Exchange. A Research Project Submitted to the School of Business in Partial Fulfillment of the Requirements for the Award of a Master of Business Administration Degree (Finance Option) of Kabarak University.
[10]	Agyei-Mensah, K. (2012). Working Capital Management Practices of Small Firms in the Ashanti Region of Ghana. International Journal of Academic Research in Business and Social Sciences, Vol. 2, No. 1 ISSN: 2222-6990.
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APA Style

Jacob Akomeah, Siaw Frimpong. (2019). Effect of Working Capital Management on Profitability of Listed Manufacturing Companies in Ghana. International Journal of Finance and Banking Research, 5(2), 29-35. https://doi.org/10.11648/j.ijfbr.20190502.13

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ACS Style

Jacob Akomeah; Siaw Frimpong. Effect of Working Capital Management on Profitability of Listed Manufacturing Companies in Ghana. Int. J. Finance Bank. Res. 2019, 5(2), 29-35. doi: 10.11648/j.ijfbr.20190502.13

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AMA Style

Jacob Akomeah, Siaw Frimpong. Effect of Working Capital Management on Profitability of Listed Manufacturing Companies in Ghana. Int J Finance Bank Res. 2019;5(2):29-35. doi: 10.11648/j.ijfbr.20190502.13

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@article{10.11648/j.ijfbr.20190502.13,
  author = {Jacob Akomeah and Siaw Frimpong},
  title = {Effect of Working Capital Management on Profitability of Listed Manufacturing Companies in Ghana},
  journal = {International Journal of Finance and Banking Research},
  volume = {5},
  number = {2},
  pages = {29-35},
  doi = {10.11648/j.ijfbr.20190502.13},
  url = {https://doi.org/10.11648/j.ijfbr.20190502.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20190502.13},
  abstract = {Working capital management plays a vital role in the success of businesses because of its effect on profitability. The purpose of this study is to examine the effect of working capital management on the profitability of listed manufacturing firms in Ghana. The study used secondary data collected from seven (7) manufacturing firms listed on the Ghana Stock Exchange for a period of ten years (2005-2014). The profitability as dependent variable was measured in terms of gross operating profit. The working capital was determined by Accounts Receivables Period, Accounts Payables Period, Inventory Conversion Period and Cash Conversion Cycle are used as independent variables. Moreover, current ratio used as liquidity indicator and firm size as measured by logarithm of sales are used as control variables. Data was analysed using the Fixed-Effects model of the Panel data regression. The regression results revealed that account receivables period (ARP) and inventory conversion period (ICP) days had a statistically significant negative impact on the profitability whiles account payables period (APP) days had insignificant positive effects on the profitability. The study, on the other hand found out that cash conversion cycle (CCC), current ratio (CR), and firm size (LOS) had a significant positive impact on the profitability. The study recommended that manufacturing firms should adopt efficient and effective ways of managing these components of working capital management.},
 year = {2019}
}

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TY  - JOUR
T1  - Effect of Working Capital Management on Profitability of Listed Manufacturing Companies in Ghana
AU  - Jacob Akomeah
AU  - Siaw Frimpong
Y1  - 2019/06/26
PY  - 2019
N1  - https://doi.org/10.11648/j.ijfbr.20190502.13
DO  - 10.11648/j.ijfbr.20190502.13
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 29
EP  - 35
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20190502.13
AB  - Working capital management plays a vital role in the success of businesses because of its effect on profitability. The purpose of this study is to examine the effect of working capital management on the profitability of listed manufacturing firms in Ghana. The study used secondary data collected from seven (7) manufacturing firms listed on the Ghana Stock Exchange for a period of ten years (2005-2014). The profitability as dependent variable was measured in terms of gross operating profit. The working capital was determined by Accounts Receivables Period, Accounts Payables Period, Inventory Conversion Period and Cash Conversion Cycle are used as independent variables. Moreover, current ratio used as liquidity indicator and firm size as measured by logarithm of sales are used as control variables. Data was analysed using the Fixed-Effects model of the Panel data regression. The regression results revealed that account receivables period (ARP) and inventory conversion period (ICP) days had a statistically significant negative impact on the profitability whiles account payables period (APP) days had insignificant positive effects on the profitability. The study, on the other hand found out that cash conversion cycle (CCC), current ratio (CR), and firm size (LOS) had a significant positive impact on the profitability. The study recommended that manufacturing firms should adopt efficient and effective ways of managing these components of working capital management.
VL  - 5
IS  - 2
ER  -

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Author Information

Jacob Akomeah

Department of Finance, University of Cape Coast, Cape Coast, Ghana
Siaw Frimpong

Department of Finance, University of Cape Coast, Cape Coast, Ghana

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APA Style

Jacob Akomeah, Siaw Frimpong. (2019). Effect of Working Capital Management on Profitability of Listed Manufacturing Companies in Ghana. International Journal of Finance and Banking Research, 5(2), 29-35. https://doi.org/10.11648/j.ijfbr.20190502.13

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ACS Style

Jacob Akomeah; Siaw Frimpong. Effect of Working Capital Management on Profitability of Listed Manufacturing Companies in Ghana. Int. J. Finance Bank. Res. 2019, 5(2), 29-35. doi: 10.11648/j.ijfbr.20190502.13

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AMA Style

Jacob Akomeah, Siaw Frimpong. Effect of Working Capital Management on Profitability of Listed Manufacturing Companies in Ghana. Int J Finance Bank Res. 2019;5(2):29-35. doi: 10.11648/j.ijfbr.20190502.13

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@article{10.11648/j.ijfbr.20190502.13,
  author = {Jacob Akomeah and Siaw Frimpong},
  title = {Effect of Working Capital Management on Profitability of Listed Manufacturing Companies in Ghana},
  journal = {International Journal of Finance and Banking Research},
  volume = {5},
  number = {2},
  pages = {29-35},
  doi = {10.11648/j.ijfbr.20190502.13},
  url = {https://doi.org/10.11648/j.ijfbr.20190502.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20190502.13},
  abstract = {Working capital management plays a vital role in the success of businesses because of its effect on profitability. The purpose of this study is to examine the effect of working capital management on the profitability of listed manufacturing firms in Ghana. The study used secondary data collected from seven (7) manufacturing firms listed on the Ghana Stock Exchange for a period of ten years (2005-2014). The profitability as dependent variable was measured in terms of gross operating profit. The working capital was determined by Accounts Receivables Period, Accounts Payables Period, Inventory Conversion Period and Cash Conversion Cycle are used as independent variables. Moreover, current ratio used as liquidity indicator and firm size as measured by logarithm of sales are used as control variables. Data was analysed using the Fixed-Effects model of the Panel data regression. The regression results revealed that account receivables period (ARP) and inventory conversion period (ICP) days had a statistically significant negative impact on the profitability whiles account payables period (APP) days had insignificant positive effects on the profitability. The study, on the other hand found out that cash conversion cycle (CCC), current ratio (CR), and firm size (LOS) had a significant positive impact on the profitability. The study recommended that manufacturing firms should adopt efficient and effective ways of managing these components of working capital management.},
 year = {2019}
}

Copy | Download

TY  - JOUR
T1  - Effect of Working Capital Management on Profitability of Listed Manufacturing Companies in Ghana
AU  - Jacob Akomeah
AU  - Siaw Frimpong
Y1  - 2019/06/26
PY  - 2019
N1  - https://doi.org/10.11648/j.ijfbr.20190502.13
DO  - 10.11648/j.ijfbr.20190502.13
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 29
EP  - 35
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20190502.13
AB  - Working capital management plays a vital role in the success of businesses because of its effect on profitability. The purpose of this study is to examine the effect of working capital management on the profitability of listed manufacturing firms in Ghana. The study used secondary data collected from seven (7) manufacturing firms listed on the Ghana Stock Exchange for a period of ten years (2005-2014). The profitability as dependent variable was measured in terms of gross operating profit. The working capital was determined by Accounts Receivables Period, Accounts Payables Period, Inventory Conversion Period and Cash Conversion Cycle are used as independent variables. Moreover, current ratio used as liquidity indicator and firm size as measured by logarithm of sales are used as control variables. Data was analysed using the Fixed-Effects model of the Panel data regression. The regression results revealed that account receivables period (ARP) and inventory conversion period (ICP) days had a statistically significant negative impact on the profitability whiles account payables period (APP) days had insignificant positive effects on the profitability. The study, on the other hand found out that cash conversion cycle (CCC), current ratio (CR), and firm size (LOS) had a significant positive impact on the profitability. The study recommended that manufacturing firms should adopt efficient and effective ways of managing these components of working capital management.
VL  - 5
IS  - 2
ER  -

Copy | Download