The impact of working capital management on profitability of listed cement companies in Tanzania: A comparative study of Tanga Cement Company Ltd and Tanzania Portland Cement Company Ltd.
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Date
2015
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Publisher
Mzumbe University
Abstract
Working capital management is needed for day to day operations of a business firm. Working capital management involves administration of the most liquidity resources of the business firms which include cash and cash equivalents, inventories and trade and other receivables. Adequate management of working capital will resulted in achievement of maximum gross operating profit thus maintaining liquidity position and maximizing shareholders wealth which is the central tendency of goal of any firm. Unlikely, insufficient working capital administration will result into illiquidity due to the fact that respective company won‟t able to generate enough GOP to enhance liquidity position. Business firms required to hold appropriate working capital so as to trade-off between liquidity and bankruptcy. Companies can use working capital management as an approach or tool to influence GOP. This paper investigated the impact of working capital management on profitability of cement companies registered in Tanzania. The study based on two companies only due to the fact that at the time of conducting research there were only two listed companies. The study covers a period of 8 years from year 2006 to 2013. Descriptive statistics, correlation and multiple regressions analyses are employed to explore the relationship between working capital components and GOP. The correlation analysis for TCCCL established that GOP is negatively related with APP against expected and ITID as expected. While correlation and multiple regression analyses found that GOP is negatively related with ACP as expected and positive related with CCC against expected. Regression for TPCCL established that GOP was negatively related with ACP as expected and positively related with ITID against expected. Also GOP positively related with APP (as expected) while negatively related with CCC (as expected). This commented that profitability of Cement Company depends on effective working capital management in order to trade off between liquidity and bankruptcy. The study is therefore recommended that for those working capital components bring unpredicted results, efficient in supervision is needed to improve. Similarly for those insignificant relationships care is required to advance from respective areas.
Description
A dissertation submitted in partial fulfillment of the requirements for award of the degree of Master of Science in Accounting and Finance (MSc-Accounting and Finance) of Mzumbe University.
Keywords
Capital management, Tanzania, Working capital management, Accounts management, Inventory management, Management, Tanga Cement Company Ltd, Tanzania Portland Cement Company Ltd, Cash conversion cycle
Citation
APA