ABSTRACT

A well designed and implemented working capital management has a significant contribution for firms' profitability, as well as to maintain liquidity powers. It is also expected to contribute positively to the creation of a firm's value and increase the wealth of its shareholders. The core purpose of this study is to examine the trends in working capital management and the impact of working capital on corporate performance. The trend in working capital needs and profitability were examined to identify if there is any significant relationship between working capital and a firm's profitability, and the creation of shareholders wealth. To achieve this, a five year financial summary of Saclux Industries Ltd for the period 2006 —2010 was used for the sample analysis. The study also dealt extensively on the importance of effective management of working capital and its benefits, the difficulties encountered while striving to achieve optimal level of working capital was also not left out. Some of the factors that determine effective management of working capital such as inflation, economic recession, size of business, nature of business etc were also studied. Finally, the study suggested ways to improve the management of working capital in order to achieve efficiency and effectiveness. Nine research questions were raised for the study while survey research was adopted for the study within a sample size of sixty (60). The data collected was subjected to simple validity and reliability test. The analysis of data was based on a statistical frequency table while the two hypotheses formed were tested using regression analysis at 0.05 level of significance. Some of the findings of the research work include that there is a cogent need for full and underground knowledge of working capital contents and implementation by financial managers, and also some planning constraints were identified as inhibiting the effective management of working capital. Recommendations were made to the effect of achieving optimal working capital management.