MJAMR

Working Capital Management and Its impact on financial profitability of mukwano group of companies in Uganda

Zikusooka Enock, Edris Kasenene Serugo


Abstract

The study aimed at Working Capital Management and Its impact on financial profitability of Mukwano group of companies in Uganda and it was guided by the following objectives; To determine the relationship between inventory management and Company’s financial profitability, to determine the relationship between receivables and Company’s financial profitability and to determine the relationship between payables and Company’s financial profitability. Firstly, quantitative secondary data was collected. Financial statements and annual reports for Mukwano Group subsidiaries spanning 2010-2020 were obtained from the Uganda Registration Services Bureau database as done in their analysis of listed Ugandan firms. Key working capital components including inventory, receivables and payables ratios were then be computed using standard formulae. Thereafter, multiple linear regression modeling within SPSS software was performed as employed by Raheman et al. (2010) to gauge associations between the independent working capital variables and dependent profitability metrics incorporating return on assets and operating margin over the period. From the findings, the correlation between Inventory Management and Financial Performance was 0.861. This strong positive correlation suggested that as Inventory Management improves, there was a positive linear relationship with financial performance. The p-value associated with the correlation coefficient was 0.000 (less than 0.01), indicating that the correlation was statistically significant at the 0.01 level. It is therefore strongly recommended that Mukwano Group formulates a centralized working capital management division tasked with establishing robust group-wide policies and strategies. Key recommendations include adopting an integrated Enterprise Resource Planning system linking subsidiaries to enhance collaboration and harmonize payment cycles. Introduction of a factoring program supported by financial institutions can aid cash flows.

Keywords

payables inventory management receivables working capital management and financial
Metropolitan Journal of Academic Multidisciplinary Research

Cite This Article

Zikusooka Enock & Edris Kasenene Serugo (2024). Working Capital Management and Its impact on financial profitability of mukwano group of companies in Uganda. Metropolitan Journal of Academic Multidisciplinary Research, 3(1). https://journals.miu.ac.ug/pages/article.php?article_id=1238

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