Effect of Working Capital Management on Profitabilty of Organisations a Case Study of Fresh Cuts (Uganda) Limited

Abstract

The study was aimed at assess the effect of working capital management on profitability of organizations using a case study of fresh cuts (Uganda) limited, The study objectives were; To establish the effect of accts receivable on organizations profitability, To find out the impact of accts payable on organizations profitability and to ascertain the impact of cash management on organizational profitability.

The study employed a case study design approach using quantitative and qualitative research paradigm in which a case study research design was employed to collect data from 30 (thirty) respondents using structured questionnaires, and interviews.

The study found out that organizations give out products on credit to attract new customers. Products with uncertain demands are normally given out to customers to pay later, the customers are always persuaded to acquire merchandises in a period of low demand and that the prices of the products are different for those who buy in cash and credit. Further, Organizations get goods quality goods on credit with a hope of paying later and that they make payments slowly to the creditors without damaging the relationship with the suppliers. It was also revealed that the purchases made on credit do not affect their cash flows. The cash position of the organization has improved and that cash management is done to improve the profitability and value. It was also revealed that cash management is done so as to avoid interruptions in operations done mostly in times of price fluctuations.

It was recommended that the Businesses should manage their Accounts Payable, in other words they should take full advantage of creditor payment terms, and use electronic funds transfer to make on-time payments on the last day they are due. They should consider both price and payment terms when choosing suppliers, as well as whether early payment discounts will reduce your overall vendor costs. Business entities should also manage their Inventory and Pricing. In other words they should avoid overstocking the inventory, and base the offerings on sales and profit margins. This can be done by cutting the products or services that perform poorly or have low profit margins and also not to forget to monitor and adjust their pricing.

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