The Effect of Working Capital on Firm Financial Performance Management in The United Republic of Tanzania

Abstract

The efficient management of working capital is very vital for business survival and thus a factor for an overall boost in profitability. The study analysed the effect of working capital management on a firm’s financial performance, a case of seven selected manufacturing firms in Tanzania listed with the Dar es Salaam Stock Exchange for the period from 2011 to 2020. The paper adopted secondary data from the annual reports of selected manufacturing firms in Tanzania. Purposive sampling techniques were used to select annual reports for investigation, and data were collected from the financial statements of the selected manufacturing firm. The results of the study indicated that the average Collection Period has an insignificant and negatively association with Financial Performance. Moreover, the study revealed that Inventory turnover in days was insignificant and negatively related to the financial performance (ROA) of the manufacturing firms. The study concludes that Finance Managers can improve the profitability of their firms by reducing the credit period granted to their customers, and this can be achieved through prompt collections of accounts receivables and delaying payment of accounts payables or average payment periods and investing the money in different profitable ventures