Working capital management and profitability of listed manufacturing firms in Ghana

Abstract

PurposeThis study examines the effect of working capital management on profitability of listed manufacturing firms in Ghana.Design/methodology/approachThe study employs a quantitative research approach within the causal research design using a balance panel of 20 manufacturing listed firms from 2015 to 2019.FindingsThe study reveals that inventory management, account receivables, account payables, cash conversion cycle, current asset, current ratio and firm size have positive effects on return on assets (ROA) and return on return on equity(ROE) whilst leverage affects them negatively.Research limitations/implicationsThe study only covers 20 manufacturing firms generally due to data unavailability. However, the outcome has useful information for manufacturing firms.Practical implicationsThe study brings to light effective ways of improving the profitability of manufacturing firms through policies.Social implicationsThe findings are beneficial to manufacturing firms and countries for the purpose of improving performance of firms and welfare of the people through direct and indirect chain effects of increasing investments, remunerations and scales of production.Originality/valueThis study adds insights into the existing literature on working capital management namely methodology, effects of components on profitability of manufacturing firms and socioeconomic implications- evidence from Ghana.