EFFECT OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY OF MANUFACTURING COMPANY IN RWANDA; A CASE STUDY OF CETRAF LTD (2018-2020)
Abstract
The general objective of this study was to find out effect of working capital management on the profitability of manufacturing company in Rwanda. The specific purpose of this thesis were: To determine the effect of inventory management on profitability of CETRAF LTD, To establish the effect of cash management on profitability of CETRAF LTD, To ascertain the effect of account receivable management on profitability of CETRAF LTD, To examine the effect of account payable management on profitability of CETRAF LTD, To establish the moderating influence of ownership and stakeholders decisions on profitability of CETRAF LTD. For the case of this study, the total population was 445 employees of CETRAF Ltd but target population consisted of only 16 employees of CETRAF’s office staff and board because they were the ones who provided useful information related to working capital management and profitability of manufacturing company. In order to facilitate the study to be well accomplished each objective of the study was investigated by using specific questions. The study applied the following tools of data collection; documentary and questionnaires. The results showed that there is a moderate 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. In this research, the researcher confirmed moderate and positive relationship between accounts receivable management and profitability of CETRAF Ltd. 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. The study established that there are positive relationships between working capital management on the profitability of manufacturing company in Rwanda. Based on these findings the study concluded that working capital management affects the profitability of manufacturing company in Rwanda. The suggestions that could be made for of CETRAF Ltd based on findings of the study is maintaining its current assets regularly and measuring its current liabilities in manner that will favor its profitability. CETRAF Ltd should keep optimum current assets in order to enhance the short-term debt-paying ability of the firm. Keeping a positive net working capital is very crucial to improve performance of company. Therefore, CETRAF Ltd have to struggle with maintenance of current assets exceeding the current liabilities.
Key words: Working Capital Management, Profitability of Manufacturing Company.
CITATION: Muhayimana, V., & Maringa, K. E. (2023). Effect of working capital management on profitability of manufacturing company in Rwanda; A case study of CETRAF Ltd (2018-2020). The Strategic Journal of Business & Change Management, 10 (1), 96 – 122.
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DOI: http://dx.doi.org/10.61426/sjbcm.v10i1.2529
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