The Impact of Working Capital Management on the Profitability of Banks in Ghana

Abstract

This study sought to bring to the fore, the impact of working capital management on the profitability of banks in Ghana via a case study of FBN Bank, Zenith Bank, Guaranty Trust Bank, GCB Bank, Cal Bank and Fidelity Bank. In the study, the researcher identified the relationship that existed between the components of working capital and the profitability of banks. The researcher as well identified the level of correlation that excited between the components of working capital and profitability of selected banks in Ghana. The researcher used the financial statements of FBN Bank, Zenith Bank, Guaranty Trust Bank, GCB Bank, Cal Bank and Fidelity Bank in the gathering of data for the study from which analysis was made. The study discovered that a negative relationship existed between Return on Capital Employed (ROCE), Acid Ratio (AR) and Cash Conversion Cycle (CCC); whereas, a positive relationship existed between Loan to Deposit Ratio (LDR) and Return on Capital Employed (ROCE). The researcher recommended that there will be the need for banks to increase their cash conversion cycle periods and prolong the settlement of their financial obligations falling due as well as increase the amount of loans in their portfolio by giving loans out to borrowing customers