THE EFFECT OF WORKING CAPITAL MANAGEMENT ON CORPORATE PROFITABILITY: CASE OF SELECTED SUPERMARKETS IN NDOLA ZAMBIA

Abstract

Purpose: The aim of the study was to investigate the effects of working capital management on corporate profitability on selected supermarkets in Ndola, Zambia. The main purpose of this study was to review research on working capital management (WCM) and to identify gaps in the current body of knowledge, which justify future research directions. WCM has attracted serious research attention in the recent past, especially after the financial crisis of 2008. Design/methodology/approach.

This was motivated by the fact that supermarkets have been having challenges in raising the working capitals to run their businesses. Most supermarkets give less attention to efficiency working capital as a viable means of raising capital. They seem not to appreciate the feasibility of raising capital through efficient working capital management. To achieve this, survey instrument was administered to 60 top management Officers of supermarkets in Ndola with a response rate of 80%. The collected data was processed using the Statistical Package for Social Sciences (SPSS) and Microsoft Excel.

The results showed that the supermarkets face liquidity challenges, low profitability, worse competitive position, increased funds tied up in working capital and Finally, lack of ability to unlock capital to finance growth It is, therefore, recommended that the supermarkets reconsider the factors that determine their working capital so that they come up with best practices of working capital that can mitigate against the challenges. The working capital management policy need to be changed from informal to formal to enhance the chances of the supermarkets to be successful in their WCM.