Examining Effects of Working Capital Management on Profitability: A Case Study of Small and Medium Enterprises in Mongu

This study focused on the examination of working capital management on profitability: A case study of small and medium enterprises in Mongu. Working capital management refers to a business process that aids companies make effective use of their current assets and optimize cash flow. The research objectives were: to assess the effects of working capital management on profitability of small and medium enterprises; to analyze the influence of financial planning on profitability, and to examine resource allocation on profitability in Mongu. The researcher used the questionnaire and interview design to collect primary data from the respondents. Questionnaires were distributed to a sample of 50 small and medium enterprises in Mongu district of western province and they all participated in the study. The findings showed that (96%) of SMEs that practiced financial planning on the business experienced favorable profits from their business’ undertakings. The findings further showed that (60%) of small and medium enterprises had their source of capital from personal savings and contributions. The study examined the effects of working capital management on profitability in terms of average collection period, average payment period, inventory turnover days and cash conversion cycle on profitability. It was found that (68%) of SMEs that had a shorter payback period of less than 30 days from their debtors realized good returns on their business. There was a significance relationship between Working Capital Management and profitability. It was also found that accessing funding by SMEs from Citizen Economic Empowerment Commission, Youth empowerment and women empowerment was not easy. The results showed that (2%) managed to access loans from CDF and youth empowerment. In conclusion, the study highlighted a positive relationship between working capital management and profitability among the sampled SMEs in Mongu. Most of the SMEs in Mongu used their own savings and contributions for capital financing. SMEs that planned for their business experienced good profits and growth of their businesses. None of SMEs on the sample benefited from CEEC fund, and only (2%) benefited from CDF and youth empowerment.