Impact of working capital management on the profitability of smes through cash operation cycles in Kumasi

Abstract

A business ought to be able to breed an adequate amount of cash and cash equivalent to meet its short-term liabilities if it is to carry on and develop in business. For that reason, working capital management which helps an entity to, efficiently and effectively manage current assets and liabilities is a key factor in the company’s long-term success; without working capital, the non- current assets will not function. The better the degree to which current assets exceed current liability, the more solvent or liquid a company is likely to be. This paper observes the relationship between working capital management practices of small and medium enterprises (SMEs) and the performance and profitability of these businesses in the Kumasi Metropolis distinctively Asafo, to evaluate key ratios of industries of such working capital management policies in ensuring that current assets meets current liabilities, to assess the degree to which management of SMEs are dedicated to the effective and efficient management of working capital. The implication of the findings is that the government of Ghana should pursue policies aimed at encouraging training and improving the managerial skills of SME owner/managers as well as creating the enabling environment for the development of improved modern technologies to transform the business processes of these vital industries.