Working capital management and its impact on profitability
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Mzumbe University
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A research report submitted in partial fulfillment of the requirement for the award
of the bachelor degree of accounting and finance in the business sector (BAF-BS) of
Mzumbe University
The firm management process of holding short-term assets such as stock, debtors, cash at bank, cash in hand and marketable securities is so-called Working Capital Management (WCM). When WCM well designed and implemented it helps in creation of business value. While conducting day to day operational activities a business is required to maintain balance between its liquidity and profitability. To measure the financial performance the business used various indicators which help in reflecting financial health status of the business. A most of researchers conducted their research in the field of banking, insurance, transportation, tourism and Agriculture industry to discuss its Financial Performance, roles and contribution in our community; even these industries played a significant role in economic development of our country. But there were various problem and challenge in their trade practices and other related operational activities occurred as the result of poor WCM even not being discussed. With the help of this research study we will Discuss working capital management and its impact on profitability of ENSOL company and through this company we will bring the real picture to other companies on how and why they should be very serious about their WCM by consider its impacts on profitability .Through various ratios like current ratio, liquid ratio, inventory turnover ratio, creditor turnover ratio ,debtor turnover and return on assets were used to find out the real trend working capital management of ENSOL company and its impact on profitability as well as its future prospects.
The firm management process of holding short-term assets such as stock, debtors, cash at bank, cash in hand and marketable securities is so-called Working Capital Management (WCM). When WCM well designed and implemented it helps in creation of business value. While conducting day to day operational activities a business is required to maintain balance between its liquidity and profitability. To measure the financial performance the business used various indicators which help in reflecting financial health status of the business. A most of researchers conducted their research in the field of banking, insurance, transportation, tourism and Agriculture industry to discuss its Financial Performance, roles and contribution in our community; even these industries played a significant role in economic development of our country. But there were various problem and challenge in their trade practices and other related operational activities occurred as the result of poor WCM even not being discussed. With the help of this research study we will Discuss working capital management and its impact on profitability of ENSOL company and through this company we will bring the real picture to other companies on how and why they should be very serious about their WCM by consider its impacts on profitability .Through various ratios like current ratio, liquid ratio, inventory turnover ratio, creditor turnover ratio ,debtor turnover and return on assets were used to find out the real trend working capital management of ENSOL company and its impact on profitability as well as its future prospects.
Keywords
Working Capital Management, Assets + Liabilities Management, Financial Performance, Profitability