The effects of working capital management on the profitability of small and medium enterprises in Imus, Cavite

• Main Authors: Baylon, Dioscoro P., Jr., Dapiton, Raechel Ann C., Romero, Karina Clara C., Romero, Ronald P., Robang, Robert I.
• Format: text
• Published: Animo Repository 2019
• Subjects: Working capital; Profit; Small business—Philippines—Finance; Entrepreneurial and Small Business Operations; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/faculty_research/9187
• Institution: De La Salle University

Working capital management (WCM) involves the regulation of both cash and current liabilities to minimize the risk of bankruptcy and increase the return on assets of a company. The study examined the effects of WCM on the profitability of small and medium enterprises (SMEs) located in Imus, Cavite. The cash conversion cycle, accounts receivable, accounts payable, and inventory management were used as a measure for WCM efficiency. Fifty-six respondents from the wholesale and retail industry participated in the study. The study used multiple regression to ascertain the significance of the relationships between variables.Findings revealed that inventory management had the highest effect on profitability, and accounts receivable had the least effect on the same. Inventory management and cash conversion cycle both indicated a significant relationship while accounts receivable and accounts payable are not significant. Accounts receivable was not significant because of the nature of the business. Most of the respondents do not have a credit policy as their merchandise are household goods. Accounts payable is not significant because of good relationships with suppliers and non-incurrence of late payments. Inventory management is significant as most of the businesses check their inventories regularly and keep accurate inventory records. The cash conversion cycle is significant because businesses were able to convert their inventories to cash. Most of the firms have taken measures such as maintaining sufficient cash balances for operations and regularly budgeting for future expenditure.These SMEs may adopt more strategic inventory management tools and software to ease monitoring and provide a more systematic approach in operations.