Can Working Capital Management Transform Non-Financial Listed Companies? A Performance-Based Analysis from Ghana

Abstract

This study examines the impact of working capital management (WCM) on corporate performance among non-financial firms listed on the Ghana Stock Exchange (GSE) from 2013 to 2022. Using a purposive sampling technique, 10 firms with complete financial data were selected. The study utilizes secondary data from audited financial statements, concentrating on Net Operating Profit (NOP) as the dependent variable. Key components of Working Capital Management (WCM), such as Accounts Receivable Days (ARD), Inventory Turnover Days (ITD), Accounts Payable Days (APD), and the Cash Conversion Cycle (CCC), were examined as independent variables. Panel regression analysis indicates a significant negative correlation between CCC and profitability, underscoring the necessity of reducing working capital cycles to improve financial performance. ARD shows a negative correlation with profitability, whereas APD reveals a positive correlation with profitability, highlighting the strategic advantages of prolonged payment terms. ITD, however, shows an insignificant relationship with profitability, suggesting industry-specific variations. Descriptive statistics reveal significant variability among firms, indicating diverse cash flow efficiencies. The findings underscore the significant impact of efficient working capital management practices on profitability enhancement. This study presents empirical results from Ghana and offers managers and legislators in developing nations practical insights, strengthening existing literature.