Abstract

This study was conducted to assess The Effect of working Capital Management on the performance of Supermarket in Buea Municipality. In this light, the objectives of the study were as follows: to investigate the effects of cash flow management on the performance of supermarkets in Buea municipality, to access the effects of account receivable management on the performance of supermarkets in Buea municipality, to evaluate the effect of account payable management 0n the performance of supermarkets in Buea municipality.

In order to gain more insights on the subject matter of this work, a review of literature was done. The theory Cash management theory by (Pandy &Jaiswal, 2011) was use to provides an understanding of how supermarket can better manage cash for better performance. The target population of the study consisted of 28staffs of supermarkets in the Buea municipality.

A structure questionnaire having a 5-linker scale was use to collect the data. Regression analysis and frequency tables were used to analyses the data. Base on objective one, the results reveal that Cash flow management positive effect on the performance of supermarket in the Buea municipality.

Based on objective two findings reveal that account receivable management has a positive effect on the performance of supermarkets in the Buea municipality. Based on objective three, findings reveals that account payable management has a positive effect on the performance of supermarket in the Buea municipality and lastly, statistically finding shows the, The regression results revealed that there is a positive and significant effect of cash flow management practice on the performance of supermarkets in Buea municipality.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Working capital management represent the relationship between a firm’s short-term assets and its short- term liabilities. It is aims to ensure that the company can afford its day-to-day operating expenses while also investing the company’s assets in the most successful direction possible accounting to (Mr. Tezom 2022).

Appropriate management of working capital is therefore essential if the firms are to achieve their objective of improved profitability and value creation for shareholders. Efficient utilization of the firm’s resources, as it relates to working capital management, means that executives should find effective and efficient ways to deal with the cash available for the day-to-day operations in order to achieve the optimum impact.

Good working capital management leads to increased cash flows, and thus leads to lesser need on external financing; therefore, the probability of default for the firm is reduced according to (Charitou eal.2010). The management of working capital is important to the financial health of business of all sizes.

The amounts invested in working capital are often high in proportion to the total assets employed and so, it is vital that these amounts are used in an efficient way according to (Haresh, 2012). A well-designed and effective working capital management has a significant contribution on profitability and liquidity position of the firms and as such, the going concern ability of an organization is greatly anchored on the continued solvency of that organization thus working capital management is important for creating wealth for shareholders according to (Sounding, 2014). As the firm make more investment in current asset, the risk is reduced and so is the return. However, a lower investment in current asset has higher solvency risk and also higher returns. Working capital management requires planning and controlling current assets and current liabilities in such a way that it eradicates the threat of in ability to meet. It therefore important for a firm to determine its optimal investment in the working capital

Management of both short-term and long-term financial assets are very important with the former directly helping in maximizing profit of a firm, its liquidity and also improves its overall performance. Therefore, by a business undertaking the role and drivers of working capital, it can upgrade its overall financial performance and minimize risks.

Measuring working capital management relates to investigating the extent of aggressive financing and investing. There seems to exist an important relationship between profitability, creditors’ payment period and the time sales take place. Supermarkets in Kenya play a significant role in the growth of the Kenyan economy according to (Deloof, M, 2003). As the economy continues to grow, there is need to create more business opportunities by creating new supermarkets and expanding the existing ones. However, in the absence of effective working capital management, most supermarkets do experience serious liquidity challenges thus even resulting in receivership.

According to Etiennot (2015), economic efficiency, growth and investment are increased by a well-organized and functioning capital market. Once the supermarket increases economically, it greatly supports the growth of the country’s economy at large since most people get employment, payment of government taxes increases and many other developments related to economic growth. The main aim of this research was to determine the impact brought by good working capital management in supermarket and find ways of improving their economic growth in future. According to Karim et al., (2017), efficient working capital management (WCM) practices is also necessary for Supermarkets during the blooming economic periods, for the reason that WCM practices is related to all aspect of managing current assets and current liabilities. According to Etiennot et.al. (2016) WCM practices is not only to immunize Supermarkets from financial turmoil but can be managed strategically to improve competitive position and profitability which is one of the main problems of Supermarkets in Kenya. There are benefits that are usually associated with working capital management practices and the Supermarkets are expected to benefit from it at the end of this research. Working capital management practices is important with regard to its direct effect on supermarket’s liquidity. Second, working capital management practices is important for managing its worth. Many Supermarkets put in significant amounts of cash in both accounts receivable and inventory, and frequently depend on short-term payables as a source of financing,

According to Enqvist et.al. (2014). Therefore, the efficient use of a Supermarkets’ current assets and liabilities, generally referred to as working capital management, is a main task of day-to-day management practice and demands careful consideration through well-structured working capital management practices according to karim et.al. (2017) asserts managing is the financial requirements and operations of any organization is very important to its management, because it has an effect on both liquid assets and profits of the firm.

Financial needs are mainly classified into two types of needs: working capital needs and fixed capital needs. That part of finance which enables an enterprise to perform its day-to-day operations is called working capital. There is need to analyse short term assets and liabilities carefully in order to manage the liquidity. Management of working capital helps managers to manage their operation through making available cash to pay for short-term debt and the maturity of long-term debt as well as expenses resulting for daily operations. So, an optimal level of working capital must be kept to trade-off between return and risk (Goel, 2015).

Working capital can be obtained through different forms like assets which are necessary for production of income or investing sources, loans (from owners, bank), delayed payments, cash and cash alternatives. Thus, the accounts receivables and inventories comprise a substantial percentage of the total firm’s assets according to (Felbeck,G., Krueger, T&Preece,D 2015).

Inventory management, strikes an equilibrium in the midst of deficit stock and surplus stock. Inventory is made up of huge numbers of quick/liquid assets especially in firms mainly dealing in retail trading. Inventory management performance is a huge determinant for the prosperity or downfall of a business. For a huge reduction of investment in working capital and exceptional operational performance, the organized management and orderly control of inventories assist in it all. Thus, the overall business objective should be inventory management since it has a remarkable capacity on profitability.

This is because a well-established inventory management levels outcome by intensifying competitive ability and market share of a firm. Excessive levels of current assets can easily result in the firm realizing a substantial return on investment. In order for the firm to operate smoothly, it should have enough current assets. Since working capital management components consist of cash management, accounts receivables management and inventory management, each of the components above has two dimensions; that is time and money.

The management of working capital in a supermarket is therefore, time which by extension is money (Mohammed, 2018). Precisely, for money to move faster along the working capital cycle, money due from debtors must be collected quickly, reduce the inventory levels relative to sales, thus reducing the amount of money tied up. This way, the business will generate more cash, or it will need to borrow less money to fund working capital. The rate of return in a firm’s investment is what is referred as profitability in business.

Profitability is the creation of shareholders’ value which is achieved by efficient management of working capital, which is an integral component of the overall corporate strategy as observed by (Lins, et al. 2017). The main reason why businesses are operated is to make profit. If the business continuously makes losses, it will end up being closed. It is therefore very vital for every businessman to focus on profit-taking and project future profit.

1.2 Statement of the Problem

The effective management of working capital is crucial for the performance of supermarkets, particularly in Buea Municipality, where competition and economic conditions present unique challenges. Supermarkets often face liquidity issues due to inefficient cash flow management, uncollected accounts receivable, and poorly controlled accounts payable.

Despite the importance of working capital management, many supermarkets in Buea struggle to optimize their short-term assets and liabilities, leading to operational inefficiencies and financial instability. This situation is exacerbated by the perishable nature of inventory, fluctuating consumer demands, and intense market competition. Consequently, there is a pressing need to investigate how these factors affect the overall performance of supermarkets.

Additionally, previous studies have highlighted a gap in understanding the specific impacts of cash flow, accounts receivable, and accounts payable management on supermarket performance in this region. This study aims to address this gap by exploring the relationship between working capital management practices and the financial performance of supermarkets, ultimately providing insights that can help improve their operational efficiency and profitability.

1.3 Research objectives

1.3.1 Main objectives.

To examine the effects of working capital management on the performance of super market in Buea

1.3.2 Specific objectives

1. To investigates the effects of cash flow management practice on the performance of super market in Buea
2. To access the effect of Account receivable management practice on the performance of supermarket in Buea
3. To evaluate the effect of Account payable management practice on the performance of super market in Buea.

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