The Influence of Working Capital Management on the Profitability of Listed Manufacturing Companies in Tanzania

Dickson Matiko Kisyeri

Department of Accounting and Finance, University of Dodoma, Tanzania.

Alex Reuben Kira

Department of Accounting and Finance, University of Dodoma, Tanzania.


Keywords: Average collection period, Average payment period, Number of day’s inventory, Cash conversion cycle, Profitability, DuPont analysis.


Working capital management (WCM) and listed manufacturing companies (LMCs) profitability are subjects that have taken much attention of scholars globally because cash management, inventory management, receivables, and payables management components are vital elements for the performance of businesses. However, there is limited literature on the subject that considered the DuPont analysis as a measure of LMCs’ profitability as well as that used the finite distributed lag model to analyze WCM variables and profitability. Likewise, there is patchy recorded literature so far that tried to use administration expenses and marketing expenses to moderate the relationship between WCM and LMCs’ profitability. To bridge this knowledge gap, this study investigated the influence of WCM on profitability of LMCs’ on the Dar es Salaam Stock Exchange Plc (DSE), Tanzania. The study used an explanatory research design based on objectivism philosophies whereby profitability data were collected from the financial reports of the listed manufacturing companies on DSE. Panel data with the Finite Distribution Lag Model was used to analyze the published audited financial reports for 14 years, from 2005 to 2018 inclusive, of listed manufacturing firms. The results showed that current year marketing and administration expenses as moderators cause a lag of three years in the average collection period and each for moderator to have a positive impact on profitability, while the current year average collection period had a negative impact on profitability. It is, therefore, recommended that LMCs in Tanzania should consider the previous three years’ average collection period, administration expenses, marketing expenses, and effectiveness in managing working capital to enhance their profitability.


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