| Abstract: | An optimal working capital management is expected to contribute positively to the profitability of firms. The purpose of this study was to evaluate the Impact of working capital management and firm’s performance in the case of Breweries in Ethiopia. The study used secondary data obtained from audited financial statements of two Brewery firms registered and work in Ethiopia. The financial statements from the firms were analyzed to determine the effect of cash conversion cycle, inventory conversion period, day’s sales outstanding and day’s payables outstanding on the gross operating profit. The data was analyzed using SPSS (Version 20.0) Software. Estimation equation by both correlation analysis and pooled panel data regression models of cross-sectional and time series data were used for analysis. The result revealed that there is statistically insignificant negative relationship between inventory conversion period, day’s sales outstanding, day’s payable outstanding and the profitability of the firms. Also, there is statistically insignificant positive relationship between cash conversion cycle and profitability. According to the results of the study, it is suggested that breweries’ can increase profitability by maintaining an optimal level of working capital. The firms can wait longer to pay the accounts payables and collecting payments from customers earlier, and keeping product in stock less time, are all associated with an increase in the firm’s performance. It is also recommended that manufacturing companies should adopt efficient and effective working capital management policies to keeping working capital at optimal level. The brewery firms shall reduce the number of days of credit sales, payable period and inventory to improve their profitability. The study concluded that there is no significant relationship between and no strong influence or impact of working capital management on profitability of Breweries in Ethiopia. |
