Does Working Capital Management Affect Growth of SMEs: a case study selected SMEs in Mukono District

Abstract

Management of working capital which aims at maintaining an optimal balance between each of the working capital components, cash, receivables, inventory and payables is a fundamental part of the overall strategy to create value and competitive advantage in businesses. The study focused on effects of the working capital practices utilized by the SMEs on the growth. The study employed a quantitative research design approach to achieve its objectives. A sample of 94 SMEs was studied. In addition, questionnaire was used to collect primary data from the field. The data collected was analyzed using descriptive statistics to determine the various variables. The study employed a regression analysis and the Pearson’s correlation analysis was used to test the significant of the relationship between WCM and growth of SMEs in Uganda. The study found that an effective managing working capital will associate with improvement in SME growth. The findings also revealed that most of the SMEs to a moderate are motivated to utilize WCM practices to keep track of their business activities. This finding was based on the regression and correlation analysis. The study also found out that firms face serious challenges as they move along with working capital management. With these findings the study makes a contribution of providing empirical evidence that has been widely missing to channel the presently passionate discussion surrounding the issues of WCM and growth of SMEs in the study context.