The Impact Of Working Capital Management On Small To Medium Entrprises (Smes)’S Financial Performances: The Case Of Polar Plastics (2014-2019)

Abstract

Working capital management has been a challenge in both the large Multinational National Companies (MNCs) and as well as the Small to Medium Enterprises (SMEs). This challenge has been evidenced by the collapse of such company types over the last decades. This study aimed at establishing the effects of working capital on the performances of SMES in the plastic manufacturing sector and in particular Polar Plastics. Literature were reviewed based on the empirical aspects, the conceptual review and the theoretical review. The exploratory research design was followed as the researcher sought to have in-depth understanding of the relationship that exists between working capital management and firm performances. Given that the intention was to explore the underlining problem within the small to medium enterprises in the manufacturing sector. The study sample was 105 employees from which the questionnaires were used as the data collection instrument. Above that for Senior Management and owners of the Company were approached with interviews in order to obtain their perceptions, knowledge and understanding of the working capital management issues affecting the firm. Data were analysed using the SPSS version 20.1 and were presented in terms of the tables. The Cronbach alpha was determined by the pilot study of the instruments at 0.752 showing a high reliability. The study found out that the cash conversion cycle and all its components must be managed in a manner that reduced the receipts and conversion of inventory, which elongating the payable cycle. It was also found that government although it has provided support, that support in terms of legislation, policy and financial has not be adequate to quick start the working capital levels for SMEs. The recommendations proffered were that government should constantly review the legislative and policy framework for SMEs in order to provide adequate support. It was further recommended that the SMEs should try to adopted the more aggressive working capital management in order to boost liquidity and profitability in the short-term.