EFFECT OF WORKING CAPITAL MANAGEMENT ON THE PROFITABILITY OF MANUFACTURING COMPANIES IN RWANDA. CASE STUDY: BRALIRWA PLC PERIOD OF 2019-2023

Abstract

This study addresses the effect of WCM on manufacturing firms' profitability, using BRALIRWA PLC as the case study for the period of 2019-2023. The paper, therefore, seeks to assess how effective WCM practices of inventory, receivables, payables, and CCC have been in influencing key profitability indicators such as ROA, ROE, and Profit Margin. It used a descriptive research design based on secondary data from BRALIRWA's financial reports. Other analytical methods involved in the analysis include correlation and regression analysis, which show the relationships among the WCM components in respect to their profitability. According to the results, though efficient WCM is critical to maintain liquidity and efficiency of operation, its components have no significant statistical impact on the profitability of BRALIRWA. The profitability measures were highly interrelated according to the correlation analysis, though the regression tests indicated that there are still other variables that can affect the profitability other than WCM. Key observations gave out a fluctuating trends in inventory, receivables, and payable management, indicating that BRALIRWA has a negative CCC hence indicating good cash flow management. The research, therefore, concludes that, although WCM bears an impact on the financial health of the firm, there is scope for its optimization in respect of receivables collection, inventory turnover, and reduction of CCC to boost profitability. Recommendations for BRALIRWA are to work on credit policies, enhance inventory control, and adopt best practices for payable management to strengthen cash flows and operational efficiency. It is also recommended that further studies be carried out to investigate other variables which might have an influence on profitability in the Rwandan manufacturing sector.