Impact of working capital management on the profitability of small and medium enterprises in South Africa

• Main Author: Solomons, Richard
• Other Authors: Adjasi, C.
• Format: Others
• Language: en_ZA
• Published: Stellenbosch : Stellenbosch University 2015
• Subjects: Small business > Economic aspects > South Africa; Working capital > South Africa; Capital markets > South Africa; Corporate profits > South Africa; UCTD
• Online Access: http://hdl.handle.net/10019.1/97296

Thesis (MDF)--Stellenbosch University, 2014. === ENGLISH ABSTRACT: The earnings of small and medium enterprises (SMEs) depend entirely on their reinvestment rate of capital. A quicker reinvestment rate of capital would not be possible when debtor’s collection period and stockholding period is slow, nor will it be possible with a shorter creditor’s payment period. Therefore, working capital management is fundamental when it comes to the overall performance of small and medium enterprises. As a result, this study examines the impact of working capital management on the profitability of small and medium enterprises in South Africa. Working capital management has a direct relationship with profitability. The data selected in this study consists of all firms listed on AltX, which is a division of the Johannesburg Stock Exchange, for the period 2000 to 2013. Descriptive statistics and regression analysis were used to evaluate the data collected and the results concurred with the relationship found between working capital management and profitability. Specific variables such as the cash conversion cycle, debtors’ collection period, stockholding period and creditor’s payment period are all associated with the profitability of firms. The dependent variable is return on assets and is the measure of profitability in this study. Furthermore, the results of this study may provide significant insight for financial analysts, shareholders, creditors and managers.