The study assessed the strategies for effective working capital management (WCM) practices for Tanzania Cigarette Company (TCC). Both qualitative and quantitative research analysis were carried out in the context of the tobacco industry in Tanzania, by examining the current working capital management strategies, the study seeks to recognize possible accurate necessities for improvement of return on equity (ROE) to shareholders of TCC. Data were collected from TCC headquarters in Dar es Salaam and analyzed using panel data technique with the aid of STATA version 14.2 software. Descriptive statistic, correlation, linear regressions, and multicollinearity tests were carried out. ROE is revealed to be positively correlated with cash conversion cycle (CCC) and inventory turnover period (DI but negatively associated with account payable days (APD) and account receivable days (ARD). Results are positively related with (CCC, ARD and DI), though negatively correlated with APD. Relationship between CCC and ROE (Regression coefficient of 0.02) implying the rise or decline in CCC affects the profitability. The impact of ARD on the firm’s profitability were positive (t = 0.790; 95% confidence level). APD had a regression coefficient of (−0.079) with p-value of (0.413). The regression coefficient between inventory turnover period and ROE was positive (0.0266) which is not statistically significant but ROE is positively correlated with CCC and DI. TCC has to develop appropriate WCM strategies to attain short-term financial obligations. Further studies needed to focus on social, environmental and economic impacts from tobacco products.
References
[1]
Abimbola, O. A., & Kolawole, O. A. (2017). Effect of Working Capital Management Practices on the Performance of Small and Medium Enterprises in Oyo state, Nigeria. Asian Journal of Economics, Business and Accounting, 3, 1-8. https://doi.org/10.9734/AJEBA/2017/35237
[2]
Akoto, R. K., Awunyo-Vitor, D., & Angmor, P. L. (2013). Working Capital Management and Profitability: Evidence from Ghanaian Listed Manufacturing Firms. Journal of Economics and International Finance, 5, 373-379. https://doi.org/10.5897/JEIF2013.0539
[3]
Anggarini, D. R., Safitri, D. R., & Nani, D. A. (2022). The Effect of Cash Turnover and Receivables Turnover on Return on Assets (ROA) in Manufacturing Companies in the Healthcare Sector of the Pharmaceutical Industry Listed on the IDX in 2016-2020. Jurnal Ekonomi &Bisnis Jagaditha, 9, 30-38. https://doi.org/10.22225/jj.9.1.2022.30-38
[4]
Arunkumar, O. N., & Ramanan, T. R. (2013). Working Capital Management and Profitability: A Sensitivity Analysis. International Journal of Research and Development: A Management Review, 2, 52-58.
[5]
Bell, E., Bryman, A., & Harley, B. (2022). Business Research Methods. Oxford University Press. https://doi.org/10.1093/hebz/9780198869443.001.0001
[6]
Chowdhury, A. Y., Alam, M. Z., Sultana, S., & Hamid, M. K. (2018). Impact of Working Capital Management on Profitability: A Case Study on Pharmaceutical Companies of Bangladesh. Journal of Economics, Business and Management, 6, 27-35. https://doi.org/10.18178/joebm.2018.6.1.546
[7]
Creswell, J. W. (2014). Research Design: Qualitative, Quantitative and Mixed Methods Approaches (4th ed.). Sage.
[8]
Deng, W. Q., Craiu, R. V., & Sun, L. (2022). Measuring the Severity of Multi-Collinearity in High Dimensions.
[9]
Dong, H. P., & Su, J. (2010). The Relationship between Working Capital Management and Profitability: A Vietnam Case. International Research Journal of Finance and Economics, 49, 59-67.
[10]
Dubey, U. K. B., & Kothari, D. P. (2022). Research Methodology: Techniques and Trends. Chapman and Hall/CRC. https://doi.org/10.1201/9781315167138
[11]
Eramus, P. (2010). The Relationship between Working Capital Management and Profitability for South African Listed Industrial Firms. The Business Review, 15, 183-188.
[12]
Gakure, R., Cheluget, J., Onyango, J. A., & Keraro, V. (2012). Working Capital Management and Profitability of Manufacturing Firms Listed at the Nairobi Stock Exchange. Prime Journal of Business Administration and Management (BAM), 2, 680-686.
[13]
Gill, A., & Biger, N. (2013). The Impact of Corporate Governance on Working Capital Management Efficiency of American Manufacturing Firms. Managerial Finance Journal, 39, 116-132. https://doi.org/10.1108/03074351311293981
[14]
Gill, A., Biger, N., & Mathur, N. (2012). The Relationship between Working Capital Management and Profitability: Evidence from the United States. Business and Economics Journal, 10, 1-9.
[15]
Grosse-Ruyken, P. T., Wagner, S. M., & Jonke, R. (2011). What Is the Right Cash Conversion Cycle for Your Supply Chain? International Journal of Services and Operations Management, 10, 13-29. https://doi.org/10.1504/IJSOM.2011.041987
[16]
Hasanudin, H., Awaloedin, D. T., & Arviany, D. D. (2022). The Impact of Cash Turnover, Accounts Receivable Turnover, and Inventory Turnover on Return on Assets (ROA) for Agribusiness Companies Listed on the Indonesia Stock Exchange (IDX) during the Period 2016-2020. Jurnal Info Sains: Informatika dan Sains, 12, 37-44.
[17]
Hazarika, P. (2010). Business Statistics: As per UGC Model Curriculum for B. Com & B.B.A Students of All Indian Universities (3rd rev. ed.). S. Chand & Company Ltd.
[18]
Hill, M. D., Kelly, G. W., & Highfield, M. J. (2010). Net Operating Working Capital Behavior: A First Look. Financial Management (Blackwell Publishing Limited), 39, 783-805. https://doi.org/10.1111/j.1755-053X.2010.01092.x
[19]
Ismail, R. (2017). Working Capital—An Effective Business Management Tool. International Journal of Humanities and Social science invention, 6, 12-23.
[20]
Javid, S., & Zita, V. P. (2014). Impact of Working Capital Policy on Firm’s Profitability: A Case of Pakistan Cement Industry. Research Journal of Finance and Accounting, 5, 182-191.
[21]
Kayani, U. N., De Silva, T. A., & Gan, C. (2020). Working Capital Management and Firm Performance Relationship: An Empirical Investigation of Australasian Firms. Review of Pacific Basin Financial Markets and Policies, 23, Article ID: 2050026. https://doi.org/10.1142/S0219091520500265
[22]
Kieu, M. N. (2004). Financial Management and Profitability of SME in Vietnam. DBA Thesis, Southern Cross University, Australia.
[23]
Komba, H. (2017). The Impact of Working Capital Management on Profitability Tanzania Portland Cement Company Limited Master of Project Management OUT.
[24]
Kothari, C. K. (2012). Research Methodology:Methods and Techniques(2nd rev. ed.). New Age International Publishers.
[25]
Lamberson, M. (2015). Changes in Working Capital of Small Firms in Relation to Changes in Economic Activity. Mid-American Journal of Business, 10, 45-50. https://doi.org/10.1108/19355181199500015
[26]
Le, H.-L., Vu, K.-T., Le, T.-B.-N., Du, N.-K., & Tran, M. D. (2018). Impact of Working Capital Management on Financial Performance: The Case of Vietnam. International Journal of Applied Economics, Finance and Accounting, 3, 15-20. https://doi.org/10.33094/8.2017.2018.31.15.20
[27]
Lune, H., & Berg, B. L. (2017). Qualitative Research Methods for the Social Sciences. Pearson.
[28]
Makori, D., & Jagongo, A. (2013). Working Capital Management and Firm Profitability: Empirical Evidence from Manufacturing and Construction Firms Listed on Nairobi Securities Exchange, Kenya. International Journal of Accounting and Taxation, 1, 5-12.
[29]
Mathuva, D. M. (2010). The Influence of Working Capital Management Components on Corporate Profitability: A Survey on Kenyan Listed Firms. Research Journal of Business Management, 4, 1-11. https://doi.org/10.3923/rjbm.2010.1.11
[30]
Mekonnen, M. (2011). The Impact of Working Capital Management on Firms’ Profitability. Unpublished Master Thesis, Addis Ababa University.
[31]
Moore, D. S., McCabe, G. P., Alwan, L. C., & Craig, B. A. (2016). The Practice of Statistics for Business and Economics. WH Freeman and Company.
[32]
Naimulbari, K. (2012). “The Impact of Working Capital Management on Profitability” of Pharmaceuticals Sector in Bangladesh. Unpublished Undergraduate, Research Work: Independent University, Bangladesh.
[33]
Nazir, M. S., & Afza, T. (2009). Impact of Aggressive Working Capital Management Policy on Firms’ Profitability. The IUP Journal of Applied Finance, 15, 19-30.
[34]
Nimalathasan, B. (2010). Working Capital Management and Its Impact on Profitability: A Study of Selected Listed Manufacturing Companies in Sri Lanka. Manager Journal of Information Management, 12, 76-82.
[35]
Nobanee, M., & Al Hajjar, R. (2009). A Note on Working Capital Management and Corporate Profitability of Japanese Firms.SSRN Electronic Journal.
[36]
Ntui, P., Kiemi, C., Gwatako, T., & Halim, M. (2014). The Effect of Working Capital Management on Profitability. International Journal of Economics, Finance and Management Sciences, 2, 347-355. https://doi.org/10.11648/j.ijefm.20140206.17
[37]
Nzioki, P. M., Stephen, K. K., Marcella, R. A., & Janiffer, M. N. (2013). Management of Working Capital and Its Effect on Profitability of Manufacturing Companies Listed on Nairobi Securities Exchange (NSE), Kenya. International Journal of Business and Finance Management Research, 1, 35-42.
[38]
Omesa, N. W., Maniagi, G. M., Musiega, D., & Mokori, G. A. (2013). Working Capital Management and Corporate Performance: Special Reference to Manufacturing Firms on Nairobi Securities Exchange. International Journal of Innovative Research and Development, 9, 177-183.
[39]
Pallant, J. (2010). SPSS Survival Manual: A Step by Step Guide to Data Analysis Using the SPSS Program (4th ed.). McGraw Hill.
[40]
Penman, S. H. (2009). Accounting for Intangible Assets: There Is Also an Income Statement. Abacus, 45, 358-371. https://doi.org/10.1111/j.1467-6281.2009.00293.x
[41]
Plonsky, L. (2017). Quantitative Research Methods. In The Routledge Handbook of Instructed Second Language Acquisition (pp. 505-521). Routledge. https://doi.org/10.4324/9781315676968-28
[42]
Ponsian, N., Chrispina, K., Tago, G., & Mkiibi, H. (2014). The Effect of Working Capital Management on Profitability. International Journal of Economics, Finance and Management Sciences, 2, 347-355. https://doi.org/10.11648/j.ijefm.20140206.17
[43]
Quayyum, S. T. (2012). Relationship between Working Capital and Profitability in the Context of Manufacturing Industries in Bangladesh. International Journal of Business and Management, 7, 58-69. https://doi.org/10.5539/ijbm.v7n1p58
[44]
Ray, S. (2012). Evaluating the Impact of Working Capital Management Components on Corporate Profitability: Evidence from Indian Manufacturing Firms. International Journal of Economic Practices and Theories, 2, 2247-7225.
[45]
Sagner, J. (2011). Essentials of Working Capital Management. Wiley. https://doi.org/10.1002/9781118386842
[46]
Singhania, M., & Mehta, P. (2017). Working Capital Management and Firms’ Profitability: Evidence from Emerging Asian Countries. South Asian Journal of Business Studies, 6, 80-97. https://doi.org/10.1108/SAJBS-09-2015-0060
[47]
TCC (2022). Tanzania Cigarette Company Financial Performance (2009-2018).
[48]
Umar, U. H., & Al-Faryan, M. A. S. (2023). The Impact of Working Capital Management on the Profitability of Listed Halal Food and Beverage Companies. Managerial Finance, 50, 534-557. https://doi.org/10.1108/MF-12-2022-0606
[49]
Virkkala, V. (2015). The Effect of Working Capital on Profitability in Computer and Electrical Equipment Industry. Master’s Theses, Aalto University School of Business.
[50]
Vural, G., Sökmen, A. G., & Çetenak, E. H. (2012). Effects of Working Capital Management on Firm’s Performance: Evidence from Turkey. International Journal of Economics and Financial Issues, 2, 488-495.
[51]
Yakubu, I. N., Alhassan, M. M., & Fuseini, A. A. (2017). The Impact of Working Capital Management on Corporate Performance: Evidence from Listed Non-Financial Firms in Ghana.
[52]
Yazdanfar, D., & Öhman, P. (2014). The Impact of Cash Conversion Cycle on Firm Profitability: An Empirical Study Based on Swedish Data. International Journal of Managerial Finance, 10, 442-452. https://doi.org/10.1108/IJMF-12-2013-0137
