The Impact of Working Capital Management Policies on the Profitability of Financial Institutions: a Study of Some Selected Financial Institutions in Ghana

In: Business and Management

Submitted By asantekoree
Words 1654
Pages 7



1.1 Background:

Financial institutions exist to perform the main function of collecting excess monies in the system and advancing them in a form of loan. Hence the bulk of the working capital resource is loan advances and cash received from customers. Again, the influx and/or springing up of financial institutions in Ghana of late has created stiff competition. This situation is likely to make most firms relax their policies on working capital especially on loan advances to customers so as to maintain or increase their market share. This could lead to huge unpaid balances which may put the finances of the companies in danger given the fact that the depositors will one day come for their monies. These can have a telling effect on the cash flow position of the firm which indeed raises an issue of profitability and survival. The management of these core assets is vital to their survival. It is for these reasons that the researcher wants to identify the various working capital strategies used by these financial institutions in dealing with such situations and the consequences of such policies on the profitability of these firms.

1.2 Problem Statement:

As the main provider of financial needs, the main debacle of financial institutions is not with the several services and products they provide, nor in their performance in the market, but with picking the best strategy in terms of the management of its working capital so as to continue their business cycle and remain profitable. Although most of the operations of financial institutions are strictly monitored, there can still be a great possibility of failure if it manages its working capital poorly. Moreover,…...

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