THE IMPACT OF WORKING CAPITAL MANAGEMENT ON THE PROFITABILITY OF SMALL AND MEDIUM-SIZED ENTERPRISES IN BUEA SOUTHWEST REGION OF CAMEROON

THE IMPACT OF WORKING CAPITAL MANAGEMENT ON THE PROFITABILITY OF SMALL AND MEDIUM-SIZED ENTERPRISES IN BUEA SOUTHWEST REGION OF CAMEROON

Abstract

Working capital is to small and medium enterprise as blood is to the system of a human being thus Suitable working capital management is crucial for business existence. This is based on the fact that an enterprise incapacity to recognize relevant working capital management practices can be its source of inability to perform. The main purpose of this study was to examine the effects of working capital management on profitability in small and medium sized enterprises in Buea southwest region of Cameroon. This study adopted four research questions to guide the process. To realize this, a descriptive research design was adopted also, the population of the study was made up of all the small and medium sized enterprises in Buea southwest region of Cameroon from which using a purposive and stratified random sampling, a sample size of 15 respondents were selected. Data was collected using structured questionnaire. Using SPSS, a regression analysis was carried out between the dependent variable and all other variables and an ANOVA analysis was undertaken to determine the differences in means between the variables. The results show that the p-values obtain for account receivable (0.269), Cash Conversion Cycle (0.756) Inventory Holding (0.065) and Accounts Payable (0.672) for the regression coefficients are also higher than the alpha level of significant of 5% specified in SPSS for the analysis. From the result of the study the alternative hypothesis was rejected in favour of the null hypothesis. The study concluded that most of these firms are able to do a thorough screens customers or client’s reference before giving credit. This is as a way of mitigating credit risks associated with credit sales. Equally, some recommendations were made, SMEs should be educated on such effects on the performances. Additionally, another issue that arise is the levels of the Economic Order Quantity (EOQ) as such there is also a need for education and awareness.

THE IMPACT OF WORKING CAPITAL MANAGEMENT ON THE PROFITABILITY OF SMALL AND MEDIUM-SIZED ENTERPRISES IN BUEA SOUTHWEST REGION OF CAMEROON