ABSTRACT

This research study investigates the effect of working capital management on profitability in a manufacturing company. PZ Cussons Industries Plc, a manufacturing company whose nature of business is manufacturing and sale of consumer products is used as case study for the purpose of this research study. It seeks to determine the effect of working capital managenient on profitability of manufacturing companies. evaluate if adequate inventory management techniques are employed for smooth running of the company, examine whether adequate working management which if judiciously followed will lead to operation cost reduction as prolit is said to be maximum when cost is minimum. The study bids to explore what problems are encountered by management in their application of working capital in the enterprise, and whether the employees in manufacturing companies have the basic skills and knowledge of working capital management. This study is signi ficance as it will form a reservoir of instruction to enable managers compare the procedure in their companies and make necessary adjustments, benefit potential researchers win) wish to carry on further studies on the topic, as well as provide direction to such scholars, and also serve as a source of secondary data for such studies. 13usi ness students•, managers, and even teachers will also benefit immensely froni the report of the study as it will refresh their memories in the procedures for effcctivc working capital management. For the first hypotheses formulated for the purpose of this study, Profitability and Working Capital Ratio were used as variables as Regression Analysis v as employed in the study as secondary data were used for the analysis. The analysis of' the second and third hypothesis WaS carried out using chi-squarc statistical analysis, as the variables involved which include smooth running of the company, and reduction in operational cost in the company were qualitative data variables. From the analyses carried out in this study, it ws revealed that: Economic inflation and delay in payment for goods bought on credit by customers are among the problems management face in the - application of working capital in manu facturing companies; not all the employees in manufacturing companies have the basic skills and knowledge of' working capital management; manufacturing companies that apply proper working capital management earn higher profit than companies which do not apply proper working capital management; there exists a positive relationship between working capital management and the total performance of a manufacturing company; the operational cost of a manufacturing company is reduced when working capital management is judiciously applied; the inventory technique to be adopted in a manufacturing company depends on the situation at a particular period. Following the findings, the researcher conclusions that; manufacturing companies tb maximization of profit as a major objective would employ proper working capital management in the running of' the company; the smooth running of a manufacturing company is not solely dependent on the inventory management technique adopted by the company, there arc other factors which have stronger effect on the smooth running of' a manufacturing company: working capital management is a very important factor for the reduction of operational cost in a manufacturing company; iianufaclurmg companies are iot rigid with the inventory management technique to be adopted in the controlling of' niventory; the situation at hand such as demand from customers, economic condition, etc may determine which inventory technique that plays. It is theref'ore recommended that: proper working capital management should he adopted in the manufacturing companies so as to ensure adequate profitability which will ensure the on-going of the company, as well as strengthen the trust of' shareholders of' he company on the management (as dividend is paid out of profit generated by the company); working - capital management (decisions) should he undertaken by employees (managers) with adequate working capital knowledge, so as to ensure decisions that will yield expected returns; management of manufacturing companies should accommodate yearly or half yearly working capital management training for the employees iii the company's activities, so as to ensure that every staff of the company has the skills and knowledge of working cpital management for a better organizational performance.