the impact of working capital management on profitability of the brewery companies listed in dse tanzania

Description

The main objective of this study was to investigate if there is relationship between working capital management and profitability of brewery companies listed on Dar es Salaam Stock of Exchange. Divergent views have been brought up by number of researchers particularly authors outside Africa who wrote on impact of working capital to the profitability of the company created a knowledge gap to investigate to what extent working capital affects the profitability of the listed brewery companies at DSE, due to number of factors like difference in laws, culture, and regulations between these country. In dealing with the objective of the study, the ratios of working capital management such as Average Collection period (ACP), Inventory conversion period in days (ICP), Average Payables Period (APP), and Cash Conversion Cycle (CCC) were used as independent variables, while gross operating profit was used as dependent variable and control variable were current ratio (CR) and debt to equity ratio (DER).This study covered all listed brewery companies at DSE covering a period of 10 years from 2005 to 2014. Regression analysis was kept in use when dealing with the objective of the study in order to determine the relationship between working capital management and profitability of the brewery companies listed in DSE. Statistical Package for Social Scientist (SPSS) was used in the study. The key findings of the study revealed that for TBL; ICP, APP, and CCC were found to have impact on profitability of the company except ACP which was against expectation. This means that all components of working capital of TBL except ACP had good relation with the profitability of the company. In the case of EABL, it is found that some of the components of working capital bear unexpected results in relationship with gross operating profit (GOP) except APP but not significant, meaning that among all components of working capital only APP had impact on the profitability of the EABL, which means other components such as ACP, ICP, and CCC facilitates the decrease in profit of the company Therefore,it requires separate study to know why the relationship of most of independent variables is not as expected to enable the management to take appropriate decision.