BEARING OF CREDIT RISK MANAGEMENT ON FINANCIAL PERFORMANCE: EVIDENCE FROM FINANCIAL INSTITUTIONS IN GHANA

Michael Owusu Akomeah, Yusheng Kong, Xuhua Hu, Stephen Owusu Afriyie

Abstract


Effective management of working capital is an essential indicator of a good financial health of an organization. This means managing working capital is important for the smooth running of a firm. Giving the significance of working capital, this paper examines the effect of working capital management on listed manufacturing firms in Ghana based on quantitative analysis of stock market data. A five-year data was sourced from the financial statements of twelve (12) manufacturing companies listed on the Ghana Stock Exchange (GSE). The profitability ratios; Return on Asset (ROA) and Return on Equity (ROE) were computed, as well as the components of working capital, which were used to calculate Cash Conversion Cycle. The Cash Conversion Cycle (CCC) was used to measure working capital, whereas the profitability ratios were used to determine the companies’ profitability. We observed that whereas 9 firms have statistically significant relation between CCC and profitability, the rest of the firms had an insignificant relationship.


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