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Working capital management (WCM) has effects on profitability of firms. The
objective of this study is to examine the effect of WCM on the profitability of listed
manufacturing companies in Dar es Salaam stock exchange Tanzania.
The quantitative research design was applied on six (6) targeted listed manufacturing
companies using panel data analysis for the period of ten (10) years from 2005 to
2014.Descriptive Multiple regression and correlation analysis were applied to
examine the relationships between components WCM and the Gross Profit (GP). GP
is used as dependent variable, while Inventory turnover in days (INVTID), Average
collection period (ACP), Average payment period (APP) and cash conversion cycle
(CCC) as independent variables and; Firm size and current ratio (CR) as control
variables. For the purpose of understanding the result of this study the combination
of all listed manufacturing companies was term as INDUSTRY.
Results reveal that industry correlation between ACP, SLn, CR and GP are in right
direction and highly significant, and the correlation between INVTID, CCC, APP
and GP are significant but in opposite direction. Regression result showed that there
is weak positive relationship between APP, CCC and GP of the industry and strong
significant positive relationship between INVTID, SLn, CR and GP further more
there is insignificant negative relationship between ACP and GP of the industry.
The study end by concluding that further investigation is to be taken for WCM
component with unexpected result. Managers have to take measures for effective and
efficiency utilization of WC in order to create shareholder’s wealth and firm value.
Subsequently the analysis of individual listed manufacturing campaniles was made,
the correlation and regression analysis shows mixed results, except for SLn and CR
reveals strong significant relationship with GP all most in all companies selected in
this study. From this study it is recommended that managers should focus on
reducing CCC, INVTID and collect cash from credit customers as soon as possible. |
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