Effect of Working Capital Management on Organizational Profitability a Case Study: Sports View Hotel

Abstract

Working Capital Management has its effect on liquidity as well on profitability of an organization. The main thrust of this study is to unveil the working capital management practices of business organizations in Uganda taking case of Sports View Hotel. A well designed and implemented working capital management is expected to contribute positively to the creation of organizations values. While there are many organizations with well designed working capital, big number still experiences poor designed working capital management which could have been as a result of unskilled human resource which is affecting effective implementation of working capital management. The main objective of the study was to examine the effect of cash, inventory, and receivable management on the profitability of an organization.

The study design was cross sectional and both qualitative and quantitative data was employed. The empirical data was obtained through questionnaires and interviews with managerial and non-managerial staff. Stratified sampling was used to determine the sample size. Spearman’s correlation coefficient tables drawn using statistical package SPSS was used to ascertain the relationship between the two study variables and the findings showed that there is a strong relationship between working capital management and profitability.

The findings of the study showed proper cash, inventory and receivable management contribute to the profitability of an organization. The main challenges encountered by the organization include lack of qualified staff, limited access of information and stake holder perception.

The study therefore, concluded and recommended that management of Sports view hotel should strength its internal controls on management of its resources, segregation of duties, and reinforce financial procedures and institute internal and external audits on working capital management.

It is also recommended that the management should prepare budget and formulate credit policy for their enterprise and to create a re-order level policy for their institution that will create an enabling environment for them to request for their supply of moderate and high quality stocks.

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