EFFECTS OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY OF MANUFACTURING COMPANIES IN RWANDA
Abstract
The general objective of this study was to find out the effects of working capital management on profitability of manufacturing companies in Rwanda. The specific objectives included: To analyse the relationship between cash management and profitability of Inyange Industries, to assess the relationship between accounts payable management and profitability of Inyange Industries, to examine the relationship between accounts receivable management and profitability of Inyange Industries and to find out the relationship between inventory control management and profitability of Inyange Industries. The population of the study was Inyange industries employees from Finance office and accounting office equal to 148. The sample size was determined with the help of the Solvin formula which provides a simplified formula to calculate sample size. When this formula was applied, the researcher got a sample size of 108. The study used the purposive sampling technique to select the sample. The study applied the following tools of data collection; documentary and questionnaires. The results showed that there is a significant positive correlation between Cash Management Practices and profitability as Pearson correlation is 0.889. The results showed that there is very strong correlation between accounts payable management and profitability as Pearson correlation is 0.884. Researcher confirmed strong and positive relationship between accounts receivable management and profitability of Inyange Industries. Since the Pearson Correlation value was 0.743. The results showed that there is very strong correlation between Inventory Control management and profitability as Pearson correlation is 0.807. The p-value is 0.000, which is less than both standard significance levels of 0.05 and 0.01. Inyange industries should keep optimum current assets in order to enhance the short-term debt-paying ability of the firm.
Key Words: Cash management, Inventory management, Receivables management, Payables management, Profitability
CITATION: Rudacogora, B., Kihooto, E. M., &Muhimpundu, M. (2022). Effects of working capital management on profitability of manufacturing companies in Rwanda. The Strategic Journal of Business & Change Management, 9 (1), 1 – 15.
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DOI: http://dx.doi.org/10.61426/sjbcm.v9i1.2160
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