Abstract:
This study investigates the impact of working capital management on the financial
performance of Tanga Cement PLC, a leading cement manufacturer in Tanzania.
Specifically, it examines how key components of working capital inventory conversion
period, accounts receivable, accounts payable, and the cash conversion cycle affect the
company’s financial performance, measured by return on assets (ROA). Utilizing a
quantitative research approach, secondary data was collected from financial statements
and analyzed using descriptive statistics, correlation analysis, and multiple regression
analysis. The findings reveal that the inventory conversion period, accounts receivable,
and the cash conversion cycle negatively impact the firm's financial performance, while
accounts payable shows a positive but statistically marginal relationship. The study
highlights the significance of effective working capital management in improving
profitability. The regression analysis demonstrated that working capital management
explains 57% of the variance in ROA, indicating a substantial influence on the firm’s
financial performance. These results align with previous studies in the field, reinforcing
the importance of optimizing working capital to enhance profitability. The study
concludes with recommendations for Tanga Cement PLC to adopt more efficient
inventory management practices, tighten credit policies, and streamline its cash
conversion cycle to improve liquidity and overall financial performance. Moreover, the
study suggests areas for future research, including the exploration of industry-specific
factors that may further impact working capital efficiency.
