IS WORKING CAPITAL MANAGEMENT IMPORTANT? EMPIRICAL EVIDENCE FROM MANUFACTURING COMPANIES IN GHANA

• Main Authors: Joseph Kwadwo Tuffour, John Adjei Boateng
• Format: Article
• Language: English
• Published: Juraj Dobrila University of Pula 2017-04-01
• Series: Review of Innovation and Competitiveness
• Subjects: Working Capital Management; Return on Assets; Firm Performance; Manufacturing Companies; Ghana Stock Exchange
• Online Access: https://hrcak.srce.hr/file/266848

The objective of the study is to empirically examine the effect of working capital management on performance of manufacturing firms in Ghana. The study used six listed manufacturing companies on the Ghana Stock Exchange for the period 2008-2014. Correlation and regression analyses were used to analyze the effect of working capital management on manufacturing firms’ performance. The study examines the effect of different components of working capital management on firm’s performance. The study finds that the current ratio, average collection period and the accounts payable period have positive effect on profitability. However, only the current ratio has statistical significance. Also, while inventory conversion period as well as the cash conversion cycle have negative effect on performance, they are all statistically insignificant. It is recommended that finance managers should implement efficient and effective ways of managing working capital management. Emphasis should be placed on average payment period, improving sales growth and maintaining higher current ratio.