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Impact of Working Capital Management on Profitability of Small and Medium Scale Enterprises (SMES)

Year	2019
Volume/Issue/Review Month	Volume - XII Issue - II, July - Dec., 2019
Title	Impact of Working Capital Management on Profitability of Small and Medium Scale Enterprises (SMES)
Authors	Abebe Asfawu
Broad area	Impact of Working Capital Management on Profitability of Small and Medium Scale Enterprises (SMES)
Abstract	This study investigates the impact of working capital management on profitability of small and medium scale enterprises (SMSE) in Guji Zone. The study used both primary and secondary sources of data; the primary sources of data obtained through personal interviews as well as questionnaires with respondents of the SMSEs while secondary data obtained from various document analyses to support data obtained from primary sources. Data obtained from 224 respondents. Sample size determined by using Taro Yamane simplified proportional formula, from a total population of 155 Guji Zone SMSE and office of towns food security’s and job creation offices. Then the stratified sampling technique has been used to collect the data from micro, small and medium scale enterprises. The data collected was analyzed using the SPSS version 20 (statistical package for social science), percentage counts, Pearson correlation analysis and multiple linear regression technique. The finding of this research proved that the inventory holding period (IHP), account receivable period (ARP), Account payable period (APP) and Approaches of working capital (AWC) of the working capital management were statistically significant and positively related with the improvement of profitability in the SMSE of East Guji zone. Thus, the SMSE of Guji zone should support more for the impact of working capital management by minimizing length of inventory holding period, Firms should have a proper debt management policy and ensure that bad debts are provided for uncollectable receivable. The SMSE should have Proper credit management policies since it help a firm to enjoy benefits of credit discounts. Finally the SMSE of Guji zone should also use either matching, aggressive or moderate approaches in managing working capital because it has the impact on profitability of firms and the SMSE of Guji zone should relay on short term financing since it increases the profitability of Guji zone.
Description	Impact of Working Capital Management on Profitability of Small and Medium Scale Enterprises (SMES)
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