The Impact of Working Capital Management on Profitability of Global Haulage Company, Ghana

Abstract

The study examines the impact of working capital management on profitability of Global Haulage Company Limited in Ghana. The service sector, which Global Haulage Company Limited forms part accounts for about 51% of national output and this show how vital the service sector has become in terms of job creation and gross domestic product growth in the Ghanaian economy. This study therefore employed the autoregressive distributed lag (ARDL) technique to examine the relationship between working capital management and profitability of firms in Ghana using Global Haulage Company Ltd as a case study with a period range of 1995 to 2013. The regression results showed that debt ratio, firm size and current assets to total assets ratio are negatively related to firm profitability whilst current liabilities to total assets ratio is positively related to firm profitability. The study therefore recommends that, management should use less of debt in financing their activities to be able to increase profit since high debt ratio adversely impact on profitability. Also, aggressive working capital policies should be pursued if management’s goal is to increase profit. In addition, policy makers should check and work on the managerial inefficiencies which are making the firm experience diseconomies of scale.