WORKING CAPITAL MANAGEMENT AND FINANCIAL PERFORMANCE OF MANUFACTURING COMPANIES IN RWANDA. CASE STUDY: BRALIRWA PLC PERIOD: 2020-2023

Abstract

The purpose of this study is to present the Working Capital Management and Financial Performance of Manufacturing Companies. Case study: Bralirwa Plc (2020-2023). The general objective of this study is to examine the contribution of working capital management on financial performance of Manufacturing Companies. The specific objectives are to examine the effectiveness of working capital management of BRALIRWA PLC, to assess the level of financial performance of BRALIRWA PLC and to examine the relationship between working capital management and financial performance of BRALIRWA PLC. The techniques of data analysis are documentation and the data analysis methods were analytical, statistical and synthetic methods. The results of the findings shows that in 2020, Bralirwa had current assets totaling 38,010,667 Rwf and current liabilities amounting to 68,876,873 Rwf. By subtracting the current liabilities from the current assets, we arrive at a working capital of -30,866,206 Rwf. A negative working capital indicates that the company may have difficulty meeting its short-term obligations with its current assets alone. By 2023, Bralirwa’s current assets had further increased to 69,852,000 Rwf while its current liabilities also rose to 104,377,000 Rwf. Consequently, the working capital decreased to -34,525,000 Rwf. This indicates that Bralirwa may be facing challenges in managing its short-term financial obligations efficiently. The current ratio shows a steady increase from 0.55 in 2020 to 0.67 in 2022 and remains constant at 0.67 in 2023. This upward trend indicates an improvement in Bralirwa Plc’s ability to cover its short-term liabilities with its short-term assets over the years. In 2020 and 2021, the current ratios of 0.55 and 0.57 suggest that Bralirwa Plc had less than one dollar of current assets for every dollar of current liabilities, indicating potential liquidity concerns. By 2022 and 2023, a current ratio of 0.67 still indicates that the company does not have sufficient current assets to cover its current liabilities fully, but the improvement suggests a better liquidity position compared to the previous years. Researcher recommended that BRALIRWA PLC should have a shorter cash conversion cycle in order to realize cash promptly enough to run the firm profitably and RALIRWA PLC should adopt a Just-in-Time purchasing on required materials and merchandise.