The Influence of Working Capital Management on Profitability of an Organization. a Case Study: Movit Company Limited

Abstract

The broad objective of the study was to establish a relationship between Working Capital Management and profitability of manufacturing companies case study of Movit Company Limited The specific objectives of the study were to find out the effect of inventory management and profitability, to find out the relationship between Accounts receivable and profitability, to find out the role of cash management in profitability of Movit Company Limited.

A case study design with both qualitative and quantitative approaches was used in the study which involved a sample of 80 respondents drawn from the study population of 100 workers. SPPS was used to analyze the quantitative data to develop tables and a figure. The time frame of the study was cross section.

The major findings of the research indicated that the company doesn’t have enough space for storing raw materials, goods in process and finished goods yet inventory management is required for smooth marketing operations which in turn increases the profitability of the company. The company is good at recovering its debts and this leads to an increase on the profitability levels.

The business keeps financial records and manages its cash flow which helps the company to synchronize cash inflows with cash outflows by using cash budgeting and forecasting in formulating cash management strategy which in turn leads to an increase in the profitability if the company. The result also revealed that there is a positive correlation between Working Capital Management and Profitability with (r=.7872, and p=.01) meaning that there is a relationship between Working Capital Management and profitability.

Recommendations of the study included that Movit Company Limited should identify the most profitable items so as to achieve higher sales targets which in turn lead to an increase in the profitability, there should be an improvement on the inventory by carrying out physical counts so as to know the available stock and the reorder levels, the company should also emphasize a strong budget control so as to know how much is supposed to be spent in a given period of time hence improving on the cash management which in turn leads to an increase on the profitability.

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