The Impact of Working Capital Management on Profitability: Tanzania Portland Cement Company Limited

The purpose of the study was to investigate the Impact of working capital management on profitability. The study employed a quantitative research design, which was useful in establishing the relationship of working capital management on profitability. A sample of 60 employees was taken and the financial statement for the period years, 2010 up to 2015 was used. However, a total of 45 responses were received. The study relied on both primary data, collected through a questionnaire, and secondary data collected from annual financial reports and financial statements of TPCC. The working capital management components used for the purpose of this study was, Accounts Payable Period (APP), Inventory Conversion Period (ICP) and Average Collection Period (ACP). Return on Assets was used as the alternate for profitability of the firm. The key findings from the study are; Firstly, there exists a significant negative relationship between average collection period and profitability indicating that an increase in the number of days affects the profitability of the firm; secondly, there exists a negative relationship between inventory holding period with profitability and negative relationship between accounts payable period and profitability. Also there exists a positive relationship between cash conversion cycle and profitability of the firm. Which indicates that as the cash conversion cycle increase it leads to an decrease in profitability of the firm. The study therefore recommends that managers of Tanzania Portland Cement Company Limited should manage their working capital in more efficient ways for reducing number of days inventory are held to an optimal level in order to improve their profitability of the firm. Managers of TPCC should also improve on their cash flow, through the reduction of their cash conversion cycle.