Abstract
Working capital management constituted a critical determinant of profitability and operational sustainability for manufacturing firms, particularly in developing economies where capital constraints and cash flow challenges were prevalent. Namanve Industrial Park, established as Uganda's premier industrial zone in 2001, hosted approximately 86 registered manufacturing firms as of October 2023, contributing significantly to the country's industrial output and employment. This study investigated the relationship between working capital management and profitability of manufacturing firms in Namanve Industrial Park, conducted between June 2023 and February 2024. Working capital management was examined through key components including inventory management, accounts receivable management, accounts payable management, and cash conversion cycle. Profitability was measured using return on assets, return on equity, gross profit margin, and net profit margin. The research explored how efficient management of current assets and current liabilities influenced financial performance in manufacturing contexts characterized by substantial inventory requirements, credit sales, and supplier financing arrangements. The study employed a correlational research design utilizing mixed methods approaches. From 86 registered manufacturing firms in Namanve Industrial Park, 73 firms participated in the research, representing an 84.9% response rate. Stratified random sampling categorized firms by manufacturing sector: food and beverages (28 firms), steel and metals (18 firms), plastics and packaging (15 firms), pharmaceuticals (7 firms), and other manufacturing (5 firms). Data collection utilized structured questionnaires administered to 146 finance managers, accountants, and operations managers, supplemented by analysis of audited financial statements covering fiscal years 2020-2023. Key informant interviews were conducted with 12 senior executives and 4 financial institution representatives serving the industrial park. The questionnaire demonstrated high reliability with Cronbach's Alpha of 0.883. Data analysis employed SPSS version 29 and Microsoft Excel, utilizing descriptive statistics, Pearson correlation analysis, and multiple regression models. Findings revealed significant relationships between working capital management components and profitability. Inventory conversion period demonstrated strong negative correlation with profitability (r=-0.742, p
Keywords
Working capital management, profitability, manufacturing firms, Namanve Industrial Park, cash conversion cycle, inventory management, accounts receivable, accounts payable, return on assets