A Study on Working Capital Management

This study explores the importance of working capital management in the food industry and its impact on organizational performance. It discusses the issues and factors affecting working capital management and proposes measures to enhance its effectiveness. The research aims to provide recommendations for small food manufacturing businesses in the UK.

A STUDY ON WORKING
CAPITAL MANAGEMENT
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ACKNOWLEDGEMENT
For the present study related to importance of working capital within food industry I would like
to extend my gratitude towards my cute drop for selecting me for the present dissertation. in
addition to this I would also like to extend my thanks and gratitude towards my parents who
allowed me to complete the dissertation without any problem or issues. Along with this I would
also like to thanks all my friends and peers who have supported me throughout the research in in
order to complete it successfully.
Thank you
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ABSTRACT
The present study is based on a working capital which is being defined as the difference between
the current asset and current liabilities. For the success of the company is very essential that there
are effective current assets in order to pay off all the current liabilities. The presentation reflected
factor setting of an objective is essential as it provides direction to the researcher that where they
have to research. From the literature review section it was analysed to there are different factors
which affect the working capital like payment to the vendors of payment received from the
debtors. Along with this the research methodology chapter identify that a combination of primary
and secondary data is very essential and helpful for making the research successful. Moreover
with the data analysis section it was identified that working capital effects and impact the
business to a great extent both and positive or a negative manner. In case the working capital is
positive then it will affect the business in profitable manner and if it is negative then it will
negatively impact the business.
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TABLE OF CONTENTS
CHAPTER 1 — INTRODUCTION 6
Overview of the topic 6
Research Background 7
Research aims and objectives 8
CHAPTER- 2 : LITERATURE REVIEW 11
Concept of working capital management 11
Issues causing negative working capital in a company 13
Factors affecting working capital management practices of the company 15
Impact of working capital management on organizational performance 17
Literature Gap 19
Literature summary 19
CHAPTER-3 RESEARCH METHODOLOGY 20
3.1 Research design 20
3.2 Research type 21
3.3 Research approach 21
3.4 Research philosophy 22
3.5 Data collection 23
3.6 Data analysis 25
3.7 Research limitation 26
3.8 Sampling 26
3.9 Research instrument 27
3.10 Research ethics 28
CHAPTER -4 DATA ANAYLSIS 30
Theme 1: Both of the above options has been selected by maximum number of respondent 30
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Theme 2: Yes the manager need to give importance to working capital management for
growth and success of small business 32
Theme 3: The respondent has selected all of the above option. 33
Theme 4: Delay in payment to vendor and Ineffective management of current assets and
liability are two different issue related to working capital management that lead in negative
working capital for organisation. 35
Theme 5: Nature of business and Credit allowed are two major factors that affect practice of
manager related to working capital management 36
Theme 6: Yes, the working capital management impact on business operation 38
Theme 7: Increase company profit margin and company have sufficient cash to meet short
term liabilities and obligations are two impact of working capital management on company. 39
Theme 8: Limited access to information and lack of formal structure are challenges that are
faced by manager in working capital management. 41
Theme 9: Most of the respondents have selected Agree options which means effective
working capital lead in achievements of company objective. 42
Theme 10: Both 1 and 3 has been selected by the maximum number of respondents. 44
CHAPTER 5- RESULTS 46
CHAPTER 6- CONCLUSION, LIMITATION AND RECOMMENDATION 50
Conclusion 50
Research limitation 51
Recommendation 52
REFERENCES 54
APPENDIX 58
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CHAPTER 1 — INTRODUCTION
Research topic – A study on importance of working capital for small businesses with reference
to food sector of UK.
.
Overview of the topic
Working capital is a very important concept that every financial management team of an
organization has to give enough concern for it. If there is no efficient management of working
capital in place, then it could be problematic for firms to finance their day to day financial
requirements, and they need to rely on external sources of finance which would be quite
expensive for an organization. So, efficiency in working capital management is very much
important to lower down the reliance on external funding and if there is any excess of cash
available with the firm then it must be invested timely in a profitable investment to make a
concern more financially sound and flexible (Afrifa and Tingbani, 2018). The requirement of
working capital for a specific firm can be determined through studying it cash conversion cycles.
There is rule of thumb in determining working capital requirement of an organization that is, if
an organization have longer cycle of cash conversion then it will need more of working capital as
against those organizations which have shorter cycle of cash conversion. A firm that
compromises on its liquidity management for maximizing profits may end up in becoming
insolvent and bankrupt. Therefore, it is necessary for a firm to determine a point of equilibrium
among its liquidity and profitability by utilizing the factors of cash conversion cycle such as
Average collection period, average payment period and inventory days. This helps in getting the
best level at which a firm should maintain its liquidity as per their industrial specifications.
So in this dissertation, researcher will focus on studying working capital requirement for
small businesses usually into food sector. Like here, different companies in food industry have
been chosen to understand the concept of working capital management, its importance and
requirements pertaining to the companies in food sector. Food sector is specifically a matter of
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concern here due to its shorter cash conversion cycle among other companies of different
industry (Wang, Akbar and Akbar, 2020). Cash conversion cycle is the indicator of quickness
with which a firm can convert its available cash balance in the beginning into more cash at the
end of the cycle. Therefore, due to its ability to collect cash at a quicker rate their working capital
requirement is comparatively low. But they can't ignore it completely as they need to invest in its
inventory much quickly as and when required, failing which may lead to destructive operations
of the firm and their customer demand would not be fulfilled accordingly.
Research Background
There are many researches conducted on the issue of working capital management for
different industries and markets highlighting the importance of efficiency in working capital
management towards maximizing profitability of a company and improving their performance as
well. In this study, the various issues related to working capital that could be arisen in small
businesses and more specifically a food manufacturing concern will be discussed. This study
aims to highlight importance of working capital with reference to small food manufacturing
businesses in UK. The study is unique from various studies that has been conducted in the past in
the sense that it is performed on food sector. Food sector or fast food industry is a very crucial
industry, where working capital requirement must be identified in advance and accordingly
provided for as and when need arises, because it is not possible for them to move forward
without sufficient working capital available with them at a particular point of time.
Working capital in the simplest way can be defined as that proportion of a total capital of
the firm which is utilized for financing day to day operations of a business without which the
business can't perform their basic activities and pay their short term liabilities on time (Lefebvre
2020). It is quite a common issue of modern businesses where they are facing difficulties in
managing their working capital. The effect of such difficulties can be seen from company's
inability to provide better quality of products and services and accordingly, this leads to
unsatisfied customers of the company.
Research aims and objectives
The aim of this research is to assess the extent to which working capital management plays
a crucial role in small food manufacturing businesses of UK. It also aims to identify different
practices to be followed in order to manage working capital of a company, so that it could be
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proposed accordingly to the companies in food sector of UK with the motive of relieving them
from unnecessary liquidity costs. The research aims to encompass various tools and techniques
in order to recognise important elements of working capital in a firm. The more specific aims
and objectives of this study are mentioned as follows:
Aim: The aim of this study is to highlight the importance of working capital management with
regards to food companies of UK.
Objectives
 To identify issues related to working capital management which leads to negative
working capital in a concern.
 To ascertain factors that affects the practices of working capital management.
 To analyse the impact of working capital management on the performance of UK
organization both as a measure of success and failure.
 To propose measures in order to enhance the effectiveness of working capital
management in a company.
Research questions
1. What are issues related to working capital management that causes negative working
capital in a company?
2. What are the factors affecting working capital management practices in an organisation?
3. How working capital management acts both as a success and failure factors while
measuring organisational performance?
4. What are the measures that can enhance effectiveness in a company's working capital
management?
Significance of the study
The study is important particularly for food companies which would be helpful for the
management of a company in making decision related to the working capital management by
adopting and utilizing various available and proposed practices towards effectively managing
working capital in an organisation. The study along with food companies is helpful for similar or
related companies in terms of size and operations in adopting those practices of working capital
management as identified by the researcher from this study. In other words, this study has a
significance for a whole industry from which food companies is related to. The other
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organizations within the same industry as food companies would be benefited in the same way in
terms of incorporating effective measures and practices of working capital management within
their business operations. Also, at last the study will benefit other researchers and scholars who
are researching in the same areas in supporting their ideas and research, so that they can conduct
in depth research over the related issues of working capital management.
Research rationale
The reason behind conducting this research is to address the issues associated with the
working capital management in small businesses. The study aims to identify those practices that
could be recommended to firms in UK's food sector in order to make them free from the stress of
working capital related issues along with advising them on how they can grow from the negative
working capital.
Structure of the Thesis
This thesis will be divided into five different chapters for studying the working capital
management concept, issues and practices and measures to address the same. Following is the
brief description of five chapters of this thesis.
Chapter 1: Introduction: The first chapter of this thesis is the representation of the overview of
the research topic where background information of both research topic and organization will be
discussed. Also, aims, objectives and questions that this research will address will be mentioned.
Along with this significance and rationale of the research will be mentioned.
Chapter 2: Literature review: In this chapter viewpoints of different authors will be critically
analysed with respect to working capital management. The various already published journals,
books and articles will be used for collecting secondary information in order to answer research
questions.
Chapter 3: Research Methodology: Here in this chapter, various tools and techniques for
conducting this research along with gathering and analysing data of the research will be
discussed.
Chapter 4: Analysis of 30 companies: Here sample of 30 companies belonging from food
manufacturing sector will be analysed in terms of its working capital management through the
components of cash conversion cycle.
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Chapter 5: Result: The results of analysis so performed on 30 food manufacturing companies of
UK in the previous chapter would be presented in this chapter.
Chapter 6: Conclusion and Recommendations: Here the conclusion so derived from analysis
and results will be presented along with recommendations for how to improvise the worst
conditions and performance can be improved.
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CHAPTER- 2 : LITERATURE REVIEW
INTRODUCTION
The chapter headed “literature review” will be concerned about the analysis of various
perceptions of authors and experts in the field of accounting and finance regarding working
capital management in an organization. Here the perceptions of various authors will be presented
in thematic way where the concept of working capital management will be critically evaluated.
The purpose of this chapter is to gain an in depth knowledge of the topic of the research,
whereby stating different views of experts and well-known authors of the field, the quality,
reliability and effectiveness of the research work can be enhanced along with giving credit to
other researchers. Therefore, in this chapter all the information obtain from secondary published
sources are included about the research topic and clarity and focus on the research problem can
be established. Here in this researcher four themes has been prepared and will be discussed in
this report where the first theme is about the “concept of working capital management”, second
theme is regarding “issues related to working capital management”, third theme is about “factors
affecting working capital management” and in the last theme discussion related to the “impact of
working capital management on organizational performance” will be done.
Concept of working capital management
According to Le (2019), Working capital refers to that proportion of overall capital of the firm
help for the short period and can be liquidized into cash without many efforts and is generally
held for the purpose of obligations that are going to arise in a short period. Examples of working
capital are cash, account receivables, marketable securities and inventory. Many authors have
referred working capital as circulating capital. So a considerable amount of time must be devoted
towards managing working capital of the company as done by most of the executives. As per the
views of Dhole, Mishra and Pal (2019), working capital management refers to the management
of current assets and current liabilities in a concern in order to ensure that there must be always
adequate level of working capital can be maintained. The interrelationships among current assets
and liabilities are the main concern of working capital management.
Working capital can be understood in two different ways, gross and net working capital.
Gross working capital is the sum total of current assets held by the company whereas net
working capital again can be explained in two different ways that is, excess of current assets over
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current liabilities and the proportion of current assets that has been financed through long term
funds. The policies and procedures includes in the management of working capital is referred to
as working capital management.
Nastiti, Atahau and Supramono (2019), has identified three policies that can be adopted
by the management in managing its working capital that is, moderate, aggressive and
conservative working capital policy. These policies explain the relationship exists between
current assets level and sales level. Companies in order to ensure effective operations strives
hard for maintaining sufficient level of working capital at any point of time. Pakdel and Ashrafi
(2019), stated that, working capital financing is a costly affair and leads to additional costs for
the company in terms of operating costs such as warehousing costs for inventories and losses due
to credit provided to account receivables. Also, adequacy must be maintained in holding working
capital as both excess and inadequacy in the level of working capital leads to some form of costs
for the company. An excessive working capital results in loosing profits due to holding idle
funds and accordingly leads to an overall inefficiency of the company. Alternatively, inadequate
working capital leads to failure in meeting short term obligations and also it becomes difficult to
maintain effective and efficient operations of the company on a day to day basis.
Sawarni, Narayanasamy and Ayyalusamy (2020), has found out that those concerns who
are successfully able to manage its working capital can ensure short term solvency of the
business, their goodwill can be established and enhanced, they can be able to arrange loans on
easy terms and can make necessary and important payments on a regular and timely basis
without getting fail. Chen and Kieschnick (2018), has suggested that working capital plays an
important role in attracting investors as it is considered to be a safety cushion for creditors and
indicates the ability of a company in meeting contingencies that could arise during the life of the
business such as uncertainties in cash flows and fluctuating sales revenue.
Lefebvre (2020), has described a good deal of importance with reference to managing
working capital in an organization. It has been seen that managing company's working capital is
not a one time task or cannot be performed in one go rather it is a day to day activity performed
to ensure adequate resources to enable smooth operations of a company without any costly
interruptions. Also, there are essential implications of working capital as it accounts for half or
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more than the half of the company's total assets depending upon the nature and industry in which
the company operates.
Boțoc and Anton (2017), has argued that working capital management is generally found
out to be maintained at a level based on previous experience of liquidity demand and the factors
such as sudden changes in market situations are not at all seemed to be acknowledged. And when
businesses faced with such changes they may generally fell into crisis which leads to negative
impact on business profitability and operations.
Therefore, the significance of determining the level of working capital depends upon the
size of a firm, as it is seen that small firms generally finance its operations through current
liabilities due to having lack of accessibility towards capital market for acquiring long term
finance. Also, larger and fast growing firms sometimes found to be dependent on current liability
financing due to their excessive and frequent need for funds. By seeing this, Wang, Akbar and
Akbar (2020), has suggested that financial managers in a company need to take up the
responsibility for directing sufficient working capital by devoting considerable time towards the
matters related to working capital in order to ensure the successful and smooth operations which
is free from any kind of interruptions and crisis from outsiders.
Issues causing negative working capital in a company
Working capital can be both positive and negative depending upon the policy and financial
performance and health of a concern. The former case that is positive working capital which is
actually advisable is a condition where the company's current assets are higher than its current
liabilities indicating company's short term solvency, while the latter case of negative working
capital is a condition where a company's current assets are lower than its current liabilities
indicating company's short term insolvency. In other words the situation where short term debts
exceeds short term assets available in the company's balance sheet.
Afrifa and Tingbani (2018), has identified two major causes of negative working capital
that is, when the company has made large amount of cash payments which subsequently leads to
reduction in company's current assets without any changes in company's current liabilities or the
other case may be if the company has extended large sum of money to its account payables. Both
these conditions considerable decrease in current assets and increase in current liabilities
respectively may leads to negative working capital in a company.
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Alvarez, Sensini and Vazquez (2021), has suggested many ways in which working capital
can be improved and managed in a best possible way. The most effective that has been identified
for avoiding any kind of working capital deficiency is by tracking company's ratio which
comprises working capital components such as current ratio and quick ratio. By controlling and
keeping up with this ratio through maintaining current assets and current liabilities in such a way
so that an idle ratio can be maintained and accordingly adequacy in working capital can be
ensured.
As per the views of Seth and et. al., (2020), negative working capital condition cannot be
always considered bad as it sometimes considered as a good sign by investors. The reason behind
considering it a good sign by investors is due to the reason that if a company use to collect cash
from its accounts receivables on a regularly and timely basis but subsequently they are not
directing this collection towards making payments to its creditors and invest the same in the
company, this leads to increase in growth potentiality of the company, but correspondingly there
would be negative working capital in a company as current assets has decreased through
collections whereas current liabilities remains unaffected.
According to Masri and Abdulla (2018) views, one way that can be utilized to avoid such
negativities in working capital is through incentivize receivables and establishing penalties for
payments after due dates. In the former case company can offer incentives in terms of discounts
to its suppliers, vendors and customers in order to get their payment within the time period
specified. Alternatively, company can charge penalties for payments that are made after due date
as by doing so companies can balance and obtain stability in working capital and accordingly
management of the same can be possible. Similarly, Seth, Chadha and Sharma (2020), has
identified that establishing an appropriate inventory management can be helpful in maintaining
sufficient level of working capital. Ability to manage inventory has a great impact on working
capital of a company. Also, inventory management is important because it is checked by
shareholders and investors of the company in order to identify operational efficiency and
feasibility of the company. As high liquidity in terms of short term assets could refer to as
insufficiency in demand of the company's products. Large inventory in the company's warehouse
also leads to problems such as unnecessary expenses in terms of higher storage costs.
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On the contrary, Prasad and et. al., (2019) has found that in many cases working capital
seems to be negative when a company borrows loan from a bank where if the loan is meant for
investing in the company in order to obtain long term growth of the company, then it can be
considered as good sign for the company. But along with the growth prospects, company used to
pay off it regularly and the current portion of the long term debt adds to the company's current
liabilities which leads to higher current liabilities over current assets and accordingly results in
negative working capital. However, as per the views of Gonçalves, Gaio and Robles (2018),
continuous redemption of loan may for a short term leads to negative working capital but if it is
considered for a long run, it is very much favourable in terms of working capital management as
lower debt balance in the capital structure there would be lower debt servicing charges which is
helpful in reducing considerable cash out flows and accordingly leads to stable working capital
of the company.
In this way, there are many issues that can lead to negative working capital along with
corresponding ways to overcome such issues in order to improve working capital management of
the company.
Factors affecting working capital management practices of the company
Working capital management of the company can be affected by many factors which helps
in determining at what level a company should maintain its working capital in order to ensure
smooth operations of the company. Many well-known authors, specialists and experts in the field
have identified different factors that could influence company's working capital requirements. In
these regards Mazlan and Leng (2018), has identified nature of the business or industry has a
great role in the management of the working capital of the company. Like if we consider two
different industries such as manufacturing and service industry. So if a company is into the
manufacturing industry, then they need to maintain considerable level of inventory but as against
this, companies in the service industry may not need to maintain any inventory which leads to
avoidance of one major component of working capital. Accordingly, working requirements
changes while considering different companies of different industries.
Similarly, according to Laghari and Chengang (2019), the type of working capital
management policy adopted by the company also affects the level of working capital in the
business. There are commonly two policies pertaining to working capital management that is
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conservative and aggressive policy. In case of conservative approach, the idea is to lower risks
through working capital management by maintaining high level of current assets against sales
level, so that the risk of market fluctuations in demand and interruptions in production process
can be avoided to the large extent. On the contrary, Vuković and Jakšić (2019) has suggested that
higher working capital can be financed through long term debts and share capital which leads to
higher expenses in terms of servicing these long term sources for a long period and accordingly
leads to negative effect on the company's working capital. This clarifies the fact that lower risks
means lower returns. On the other hand, aggressive policy of working capital management
follows the idea of maintaining current assets just to that level that is sufficient to meet current
liabilities. So, a considerable amount of expenses can be reduced due to lower cost of financing
working capital. But as per the opinion of Aduda and Ongoro (2020), aggressive policy adoption
exposed company to many risks such as sudden shocks from market fluctuations. So, looking at
this another policy that has been largely used by contemporary businesses is moderate policy of
working capital management which establishes balance between above two policies and
considered to be a best way of determining working capital requirements.
There are many more factors that influences working capital management of a company
such as credit policy, competition and growth and expansion potentiality of a business. Chauhan
and Banerjee (2018) has pinpoint that the type of credit policy plays an important role in
determining working capital of the company. If there would be a liberal policy then there would
be higher need of working capital while a tight policy of credit extension leads to lower
requirements of working capital. Also, competition in the industry greatly affects the company's
working capital requirements as in case of highly competitive industry there is a need to maintain
sufficient level of inventory and also it is better to extend liberal credit policy to the customers in
order to survive in the market. Therefore, this requires higher working capital in the business
while if an industry is less competitive there are no such requirements pertaining to credit policy
and inventory level maintenance. Accordingly, there would be lower requirement of working
capital in the company.
All the above factors are generally taken into consideration while talking about working
capital management and at what level companies must maintain its working capital. But along
with this Leeson (2017) has argued that the major factors that affects working capital
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management of a concern is average collection period, average payment period and working
capital or cash conversion cycle.
In these way different authors has suggested different factors that could affect working
capital management practices in a company along with negating the same by other authors in
order to prove their viewpoints regarding how working capital management practices can be
affected in a concern.
Impact of working capital management on organizational performance
Working capital is considered as the crucial components of company's financial
management and thus affects the profitability of the company to a great extent. As per the views
of Kaushik and Chauhan (2019), managing working capital efficiently is very important for the
company especially during the time when there are good deals of opportunity of investments are
available with the company. It is because if the company is able to manage its working capital
efficiently then it can easily raise additional finance for accomplishing its strategic goals along
with decreasing financial costs and accordingly can enhance its profitability. Therefore, it can be
said that working capital management has a vital role in company's success and thus indicates
positive relationship with the performance of the company. According to Mulyono, Djumahir
and Ratnawati (2018), if we look at working capital management in the context of firm's cash
conversion cycle, then it can be said that there is a positive relationship between working capital
management and company's profitability.
Another author supports that Kayani, De Silva and Gan (2019), working capital is
difference between company current assets and current liabilities or capital that is primarily used
for supporting day to day activities so that end objectives can be achieved. In addition to this
working capital contribute in meeting several expenses such as purchase of stock, credits sales
and salaries and wages to employees etc. Thereby, working capital management has direct
impact on business growth and success as sufficient amount of working capital will helps in
bearing all expense and performing several operation required for achievements of company
objective. At the same time, excess of working capital leads in ineffective utilisation of available
resources or current asset which company can use for its growth and development. So, from the
perspective of author it is life blood of business as helps in meeting numerous expenses so that
company can smoothly operate in external environment.
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From the perspective of Singh, Kumar and Colombage (2017), working capital
management is an process or strategy that is used by manager of company to monitor and
manage its working capital in order to meet daily expenses. There are various positive impact of
working capital management on organisation such as it helps in ensuring liquidity by effectively
monitoring account payable, receivable, stock management and many more. Thus, manager is
able to decide sufficient cash needs to be present by business so that it can easily pay off
necessary expense without any further delay. Secondly, it also lead in enhancing profitability of
organisation as there is proper management as well as allocation of cash in various segment.
Thirdly, the company through working capital management is able to improve its financial health
by assessing the sources of inflow and outflow of cash in best possible manner. So, all these
resulted in effective operation and performance of business in external environment by building
trust among customers, suppliers and other interested stakeholders.
On the contrary note, Hingurala Arachchi, Perera and Vijayakumaran (2017), has
specified some of the native impact of working capital management on organisation performance
that is only monetary factor is considered. In another words, this concept only include thing that
can be measured in terms of money that is finished goods, debt receivable etc. While, it does not
take into considered unsatisfied work performances, period of recession thus manager take
decision on unequal basis which may resulted in problem or issue for organisation in coming
year. Secondly, it does not incorporate sudden changes that are happening in external
environment that have significant impact on business operation. So, it create problem in smooth
operation of business or performance of several task as per desired.
According to Maeenuddin and Raza (2020), if company will not lay emphasis on
management of working capital then they would not run their operation in external environment.
As they will face challenges related to meeting their daily expense or underutilisation of
available cash. So the author lay emphasis on effective management of working capital for better
performance of organisation. It helps company in managing its cost, making payment to various
individuals and delivering timely services to large number of individuals living in society.
Thereby, the working capital management have both positive and negative impact on
organisation performance.
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Literature Gap
Literature gap refers to the portion of the research piece that is under-explored and are not
yet studied. This can be in any form like population or sample, methods adopted for conducting
research, collection and analysis of data or any other variables of the research. Researcher while
searching for their research may identifies the scope for further research, and for this
identification, there is a need to perform thorough review of already existing literature. So, in this
particular research related to working capital management, by performing an in depth review of
literature, it has been found out that there is no study undertaken for identifying the importance
of working capital on small businesses into food sector. Therefore, in this research, the whole
study will be conduct on small food businesses of UK in order to identify what is the role of
working capital in companies into the food sector, how it is determined and what are the factors
that affect working capital in such businesses.
Literature summary
By performing a detailed review of existing literature related to working capital
management, there are many concepts, issues, factors and impacts related to working capital
management has been identified. Many of these concepts, issues and factors will be now studied
with reference to UK's small businesses into food sector. As many factors are identified by the
researcher such as policies, competition, nature of business, average collection period, average
payment period and cash conversion cycle, now researcher will perform study on food sector
businesses in the context of these identified factors further in this research.
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CHAPTER-3 RESEARCH METHODOLOGY
This chapter is about specific method or procedure that has been pursue by research in
order to gathered relevant information related to working capital management for small scale
business. It explained in detailed about all techniques used by scholar in context of identifying,
collecting, processing, analysing and integrating information so that useful in-sight can be
gained. So, this chapter will help reader in critically evaluating the reliability as well as validity
of information which has been gathered from different sources.
3.1 Research design
It is framework of research techniques and method that are selected by scholar to pursue the
study related to particular topic so that necessary information can be gathered. Moreover, it
explained the type of research, descriptive, experimental, co-relational, diagnostic and
explanatory. Descriptive design is one in which the scholar is mainly interested in describing the
case or research study by making use of theory. On the other hand, experimental is another
research design method that establishes relationship between cause and effects of situation that is
change in one result in impact on other. This is also known as true experimental in which
scientific methods are used to pursue the study related to the topic. So, it is highly practice
research design method that helps in resolving typical problem (Schuh and Woelk, 2017).
Correlational research design focused on building relationship between two close connected
variables. At the same time, in such type of research design relationship between number of facts
are interpreted and sought so it is mainly useful in case of understand the trends. Diagnostic
research design is also used in research in which scholar has to evaluate the cause of specify
topic thus it contribute in learning more factors that create problematic situation. The last type of
research design is explanatory in which researcher makes use of its own idea and thought to
explore theories.
So, out of all of the five research design, the scholar has planned to select descriptive
research design as it helps in generating effective outcome or useful information. Moreover, such
research design contributes in systematic representation of necessary information so that
interested individuals can easily understand the same. In addition to this, the scholar does not
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start with Hypothesis, but focused on developing the same after collection of data from different
sources. Test of hypothesis is done through analysis and synthesis of data.
3.2 Research type
Research is defined as carefully studying about specific topic or particular concern by making
use of different scientific methods. So, this is portion of research method that explained about
type of study the researcher is going to do in order to gather analysis and interpret necessary
information related to management of working capital for small scale business. Basically, there
are two common methods that are used by scholar to pursue the study that is qualitative and
quantitative. In qualitative research open ended question are used to collect data, moreover they
are non-numerical. This type of study helps scholar in understanding what respondent actually
thing and why they think in specific manner. So, it helps in understanding reason. One to one
interview, text analysis and case study are various different methods that are used for qualitative
research (Lê and et.al., 2019). Analysis is done in qualitative method through categorising,
summarising and interpreting the information. In quantitative method, statistics or numerical are
generally used to complete the study. This type of method is useful in testing the theories and
assumptions thereby include method such as observation, experiments etc. Quantitative make use
of tables, graph and number to represent necessary information so that interest individuals can
easily rely on it. Therefore, qualitative research type is mainly expressed in words as compared
to qualitative which make use of statistical information to represent the information in better
manner (Shields, 2019).
Therefore, from the two method stated above the research has make use of qualitative
research method as it contribute in-depth study related to specify topic or subject area. Moreover,
they are more useful in understanding the concepts, thought and experience thus it focused more
on exploring ideas and formulation of theory.
3.3 Research approach
Research approach is plan and procedure that are used by scholar to complete the study by
collecting, analysing and interpreting necessary information. The research approach will be
selected by scholar generally depends upon the problem that needs to be addressed through
21

research in order to gathered necessary facts. The research approach is generally categorised into
two components such as inductive and deductive approach to gather and analysis information
related to the topic. Likewise inductive is an method in which researcher collect data related to
its topic of interest then analysis or observe the data patter with an objective to develop particular
theory. The theory contributes in explaining the pattern of data and helps in better interpretation
and analysis (Hanks, 2017). So, it can be illustrated that in inductive approach the scholar
generally start with set of observation and move to general set of propositions or develop
particular theory.
On the other hand, it can be deductive approach generally start with particular theory or
hypothesis on which test are implicated to find out necessary information and data. So, this
method helps in moving from general to specific one so most of the people generally associated
it with scientific investigation. In this method the scholar devote time to study what other have
done, read existing theories then test the hypothesis which are emerging from those theories.
Thereby steps that are involved in the deductive approach can be stated as theorise, analysis of
data then hypothesis supported or not.
Out of both the approach researcher has plan to make use of inductive approach as it is
more suitable for qualitative research and helps in getting necessary information. Moreover, it
can be stated that inductive research method will helps researcher is effectively make use of
secondary data, model and concepts to generate link between research objectives and questions
(Hung, 2017). Thus, the scholar has pursued inductive method to complete study related to
importance of working capital management for small business in food industry of United
Kingdom.
3.4 Research philosophy
This is also one of the part of research methodology that explained the view, idea and
concept that researcher have while completing the study or making research. It is vast topic to
discuss in detailed as it deals with source, nature and development of knowledge. Moreover, it
can be stated that research philosophy is belief related to the way data is collected, analysis and
used by researcher for specific purpose (Callaghan, 2019). Pragmatism, positivism, realism and
interpretivism are four of the research philosophy that are used by scholar while completing the
22

study and gathered necessary information. In addition to this, choice of research philosophy
generally impacted by practical implications. Likewise, Pragmatism is mixed or multiple
method that is mainly suitable for quantitative and qualitative study. So it considered something
to be true without needs confirmation that it is universally true. While, positivism is another
research methodology that involves use of highly structured, large samples and can be used in
measurements of both qualitative and quantitative study. So, positivism believes that reality is
stable and can be observed without interfering the phenomena (Yong. and Nai'en, 2017).
Generally in positivism research philosophy, only factual knowledge gained through observation
that can be easily trusted. Moreover, it has been identified that the role of researcher is limited in
objective way in context of data collection and interpretation. The research in positivism is
independent study and there is no providing of taking human interest into study. As comparison
to positivism, realism is another method that focused on chosen method that fit the subject
matter either qualitative or quantitative study. At last it can be summarised that interpretivism is
another philosophy that is considered by the researcher while pursing the study. In interpretivism
method, small methods are used to conduct in depth investigation and qualitative study
pertaining to specific topic (Kaya and et.al., 2019). The scientist admitted that there may be
many interpretation reality but maintenance of interpretation is part of scientific knowledge. So
study of phenomena in their natural environment is key to interpretive philosophy so scientist
cannot avoid affecting phenomena.
Therefore, in order to complete the study related to importance of working capital
management for small business, positivism philosophy has been selected. The philosophy
illustrate that belief is independent from research and it can be purely objective. Furthermore
they are suitable for qualitative study so they are used to complete study and gathered necessary
information related to the topic.
3.5 Data collection
This is research methodology that explained in detail about the method that are used by
scholar to gathered accurate, reliable and more fruitful information pertaining to the topic for
better outcome. In another words, data collection is mainly associated with assembling of
necessary facts, figure and information so that the study can be used by different interested
23

individual for their respective purposes. There are commonly two methods that can be used by
scholar while pursing the study that is primary and secondary research method. The primary
research method is first hand method in which researchers itself devote, time energy and efforts
to gather information from respondent through creating questionnaire and interview. So, the
scholar by collecting information through survey and many other sources is able to get first and
hand and useful information related to subject (Flick, 2018). Primary research can be also know
as field research in which original research is conducted for specific purpose through making use
of range of method so that necessary information can be drive. The advantages of primary
research method are that there is no dilution of information can be customised as per study
requirements. In addition to this primary method, helps researcher to get in-depth related to
particular subject matter through asking as many as question to several respondents. Despite of
some many advantages of primary method, there are key areas where it lacks such as lot of time,
money needs to be spend to gathered information facts, figure related to primary research
method. At the same time this method may not be suitable in each and every case so secondary
method should also used with primary for better study.
On contrary note, secondary data collection method involves use of secondary sources or
already published information to study on particular topic. Therefore, generally books, journals
and articles published from well know author, internet or online method are used by researcher
to collected sufficient information and analysis, interpretate them for better outcome. Public
libraries are also good sources of gathering information through secondary sources as they have
plenty of books and material which contenting lot of knowledge related to different subject area
(Jentoft and Olsen, 2019). The biggest benefit of secondary research method is that it is
economical and time saving method as information can be easily access through different
sources without incurring much expense. Thereby, it fill in gaps that primary method have and
improve the understanding of problem. While, secondary research method also have some
disadvantages like data gathered from specify book, site may be outdated or not known so it
create issue related to validity and reliability of information.
Moreover, good researchers make use of both primary and secondary method to collect
relevant and accurate information as it helps in getting information from different areas. The
24

study will make use of both primary and secondary method to complete the study related to
working capital management for small scale food business across United Kingdom (Jensen,
2018). As both will helps in gathering much more accurate information pertaining to the study.
3.6 Data analysis
This is part of research methodology that specify about the techniques, tools or method
that will be used by researcher to analysis and interpret the data so that useful information can be
drive and use as per the objectives. In another words, it is systematic application of technique to
inspect, clean and transform information with a motivate to extract useful information for better
decision making. So, it is most significant part of the research as it helps in finding outcome of
the study or data collected from different sources. There are two different methods that are
generally used by scholar to study on topic such as importance of working capital management
for business. Thematic and SPSS are different method that can be used by scholar to complete
the data analysis. Thematic analysis is an method that is fruitful for analysing qualitative data by
applying set of text like interview transcripts. In this method the scholar closely examine the
process with an aim to identified common themes related to topic, idea and pattern so that they
cannot be repeatedly used in any circumstances (Filzmoser, Hron and Templ, 2018). Thematic
method is good approach when researcher wants to find out about opinions, views and
knowledge about the people or their set of value. Moreover, themes, charts and pictorial
representation are better form of interpreting necessary information as users can easily
understand without wasting much time and efforts.
On the other hand, SPSS is statistical package for social science that is used in research
for quantitative study that involves use of numerical, big facts and statistical information. There
are certain advantages and disadvantages of SPSS method that are used by scholar to continue
study related to specific topic. Likewise it is most expensive, having limited function as well as
very similar to excel. On contrary note, it is very easy and quick or simple method to learn the
way quantitative analysis can be completed. In addition to this it have capabilities to handle large
amount of data and information gathered from various sources thus helps in better interpretation
and effective use of different purposes (Elliott, 2018). Moreover it also offer feature of great
user interface.
25

Therefore, scholar in order to study related to importance of working capital
management for small business has make use of thematic method as it is most suitable for
qualitative study and helps in getting in-depth information. Pictorial represent helps in better
understanding of information.
3.7 Research limitation
This is portion of research methodology that explained about the limitation present in the
study that has not make research as desired. Each study has certain limitation that impact on the
finding of the study. Such as despite of limited time, availability of resources the researcher has
tried to make best use of available resources and time to gathered relevant information.
Moreover, there was limited access to data and information but researcher has put its best efforts
to get as much as information related to the topic so that study can be made useful for others
(Žukauskas, Vveinhardt and Andriukaitienė, 2018). Lack of previous study is also one the
limitation related to study as there are not much study related to importance of working capital
management for small scale business in food sector. Thereby the researcher has tried its best to
overcome all the research limitation so that the study can be made fruitful.
3.8 Sampling
This is part of research methodology that explained the sample that company takes from
group of individuals to know about their points of view and opinion. So sampling is an statistical
analysis process that involves observation from large population to know about they in better
manner. Research are very much aware that there is limited time, money and resources to
complete the study so sample contribute in gathering information in minimum time frame and
cost. There are different sampling method such as probability and non probability sampling, in
which probability sampling which each member of population will be given equal chance of
being selected (Zhang, 2017). On contrary, in non probability, individuals are select on the basis
of non random criteria thus not every individual is given equal chance to take active participate
in the interview or sample process.
Furthermore, probability method includes simple random sampling, systematic sampling,
stratified sampling and Cluster sampling. Whereas non probability consists of convenience
sampling, voluntary response sampling, purposive sampling and Snowball sampling. So, out of
all simple random sampling has been selected in which every member of group of individuals is
26

given equal chance to share its points of view. So, in order to complete the study related to
importance of working capital management researcher has taken sample of 30 small companies
to know about the way they manage working capital for growth and success of business.
3.9 Research instrument
Research instrument is the tool that is used to collect, measure and analyse data related to
specific subject matter so that necessary information can be extracted and end goals of company
can be achieved. This allows instrument to collect reliable, accurate and relevant data and
information related to research problem so that significant information can be extracted.
Different instrument that are used for proceeding the research are questionnaires, aptitude test,
survey and observation form. There are various characteristics of good research instrument such
as valid, reliable, must gathered suitable and relevant information related to research topic and it
must be free from biases and include culture and diversity of study. Various types of research
instrument are structure interview, unstructured interview, non directive, focus and focus group
interview that help in gathering and analysing necessary information for better study related to
specify subject matter.
The structure interview is formal set of question that each interviewee asked in order to
collect relevant information. On the other hand unstructured interview is less set of formal
question in which the researchers can easily modified the wording and sequence of questions.
Non directive interview is an unguided interview that consists of open ended question that are
asked to respondent. While it can be stated that the Focus interview emphasis on interviewees
subjective and personal responses in which the researchers is engaged more and more to extract
necessary information (Mielcarz, Osiichuk and Behr, 2018). The last instrument that is used for
conducting research is focused group interview in which specific group of participants are
selected to share their respective points of view or perspective so that the study can be made
fruitful.
The scholar has make use of focused group interview as for understanding importance of
working capital management for small business 30 companies have been selected and necessary
analysis have been made pertaining to the study.
27

3.10 Research ethics
Research ethics can be termed as ethical, value and moral principle that are followed by
researcher while completing the study pertaining to specific topic. This states that when people
are invited to participate in research they should have complete knowledge or understand about
what type of study, its purpose, benefits and associated risk. Moreover, they need to be providing
equal chance to participate in the study or interview process. Thus, the researcher has
incorporated necessary steps to ensure equal chance to all and no discrimination among
individuals on basis of caste, gender, religion and any other factor. So in the process of data
gathered, analysis and interpretation researcher has avoid bias to extract all necessary
information pertaining to the study.
In addition to this the research has ensure that it honestly share all information in the
dissertation so that people can easily rely and trust on the extracted information. Transparency
has been maintained by scholar while conducting research related to importance of working
capital management for small business. Consent from respondent has been take regards to that
their view; information will be used in pursing the study (Kara and Pickering, 2017). At the same
time they are clearly informed about the purpose of the study and why it is necessary to make
which has contributed in following all ethical principle. Furthermore, it has make use of citation
wherever required that have helped in ensuring reliability and validity of information collected
from secondary sources.
The scholar has also make use of advance technology to store and protect data from being
misuse by any other individuals so that no harm can be caused to other person. So, the researcher
has ensured protection of information and data gathered from different sources that is secondary
and primary so that no ethical issue may arise in future circumstances (Zhang, 2017).
Independent review has also one of the ethical principles that have been considered by researcher
that is each individuals or respondent is give chance to participate in the questionnaire. At the
same time scholar has ensured that respect and recognition is provided to each respondent by
taking care of its view, idea and belief so that they are happily and freely ready to share
information.
28

Moreover, the researcher has informed respondent about what has being learned and
achieved through study related to significance of working capital management for small scale
business (Hesse and et.al., 2019). Therefore, the research by maintaining informs consent,
confidentiality of personal data of respondent is able to promote active engagement of
respondent in answering the questions so that crucial data can be extracted related to study. All
legal laws has been considered and abided while pursing the study for effective collection,
analysis and interpretation of information.
Hence in the end it can be stated that for the research to be successful and effective it is very
essential to follow all the research ethics. in case the researcher does not follow the research then
the outcome of the reserve researcher will not be effective. Thus, in order to successfully
complete the research over importance of working capital management within food industry it is
essential for researcher to comply and other to all the research ethics successful people stock
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CHAPTER -4 DATA ANAYLSIS
Data analysis is the fourth chapter that contain detailed related to the way data collected
from different sources that is secondary and primary method helps in better analysis of
information. In another words, it specify the way data will be analysed, interpret so that the
interest individuals can understand the information and take corrective decision. In order to
complete study related to significance of working capital management for small business
thematic analysis will be used. In thematic analysis, theme, graphs and charts are used to
represent data that has been collected from 30 small scale companies to know about the
importance of working capital management.
Theme 1: Both of the above options has been selected by maximum number of respondent
What does meant by working capital
management?
Outcome
Business strategy to manage working capital of
company
4
To manage current liability and current assets
to ensure short term liquidity of firm
3
Both of the above options. 23
Total 30
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Interpretation: From the above report it can be stated that the respondent are aware of the
concept of working capital management. As per them both of the options or definitions are
correct as 77% has selected both of the above options. There are 10% of people that has selected
that management current liability and current assets in order to ensure short terms liquidity of
firm. On the other hand, it can be illustrated that there are 13% that has opted that working
capital is business strategy that contribute in effective management of working capital of
company. Moreover, the Mielcarz, Osiichuk and Behr, (2018), also stated that working capital is
management of current asset and liabilities of company so that short term liabilities can be easily
meet and organisation objectives can be achieved.
In addition to this Afrifa and Tingbani (2018) articulated that working capital is also defined as
theme management of the current assets and current liabilities in order to meet liquidator
requirement of the company. this is necessary for the success of the company as if the current
assets and current liabilities are properly managed and evaluated then this will improve the
liquidity position of the company. The company will be in capacity to clear of copy of all the
current liabilities with the present current assets. For this the ideal working capital ratio for
company is 2 : 1. This simply means that for every current liability the company must be having
double the current assets so that it can be cleared off easily.
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Theme 2: Yes the manager need to give importance to working capital management for growth
and success of small business
Does the manager need to give importance to
working capital management for growth and
success of small business?
Outcome
Yes 29
No 1
Total 30
Interpretation: The above pie chart clearly represent information related to whether manager of
30 different companies give importance to working capital management or not. From the 97% of
respondent it has been identified that manager of company needs to give importance to working
capital management so that organisation can grow and succeed in future circumstances. As,
working capital management contribute firm in having sufficient resources to meet all expense of
company. While there are 3% of respondent that has opted No which means that as per their
perspective there is no need for manager to take steps towards working capital management.
32

Therefore, it can be concluded that maximum number of people supported that working capital
management is essential for growth and expansion of firm in external environment.
The author Laghari and Chengang, (2019), further supported that working capital management
contribute company in having sufficient amount of capital to operate its daily function. Moreover
the working capital is also essential for the success of the company as guides for the employees
that how they can effectively use the current assets and order to pay off all its current liabilities.
Hence because of this it is essential for the manager that they give importance to effective
working capital management so that it can lead to growth and success of the companies within
the food industries like McDonalds and KFC.
Theme 3: The respondent has selected all of the above option.
What are the benefits of working capital
management for company?
Outcome
Ensure liquidity 4
Ensure interruption in operation 5
Improve financial health of company 7
Contribute in value addition 3
Enhance profitability of company 2
All of the above 9
Total 30
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Interpretation: The table represent the data related to the benefits of working capital
management for organisation. Likewise it has been interpreted that there are several benefits
such as it ensure liquidity, interruption in operation, enhance profitability of company and
improve financial health. There are 30% of respondent that are in support that all of the above
mentioned are benefits that company gained through effective management of working capital.
Whole there are 23% of people that has specified that improve in financial health of company is
the benefits that small business gained through management of working capital. At the same time
there are 17% individuals that has opted that working capital management lead in effective
operation of business in external environment by meeting all daily expenses and satisfying needs
of customers beyond their expectancy level. Around 10% of people that has stated that effective
working capital management contribute in adding value to organisation or developing strong
brand image in minds and hearts of customers. On the other hand, there are 13% individuals that
specified that company get benefits of ensuring liquidity through devoting time and efforts in
management of working capital. While remaining 7%, clearly explain that effective management
of current asset and liability of company lead in growth in profitability of company in long run.
The author Mazlan and Choong, (2018), also illustrated that there are number of benefits that
company gained through working capital management process such as increase in profit, brand
image and many more. So, time and efforts need to be invested for effective management of
capital and growth of firm.
34

Theme 4: Delay in payment to vendor and Ineffective management of current assets and liability
are two different issue related to working capital management that lead in negative
working capital for organisation.
What are the different issue related to working
capital management that lead in negative
working capital for organisation?
Outcome
Poor inventory management 5
Past due receivable 3
Delay in payment to vendor 10
Ineffective management of current assets and
liability
8
All of the above 4
Total 30
35

Interpretation: In recent scenario there are many small scale companies that are facing issue
related to working capital management that has lead in negative impact on organisation operation
and achievement of end goals. The table represent several issue that are face by organisation
while managing the working capital likewise poor inventory management, past due receivable,
delay in payment to vendors and ineffective management of current assets and liabilities. The pie
chart represent that around 33% respondent stated that delay in payment to vendor is one of the
crucial issue that manager face while managing working capital of company. On contrary note
there are 27% of people that has specified that ineffective management of current assets and
liability is the major issue pertaining to working capital management. At the same time there are
17% that has stated that poor inventory management is also issue face by manager of company
while managing working capital. While there are only 13% of people that has supported all of
the above options or as per their view all the above options are issue that manager of company
face in terms of ensuring sufficient capital to meet all daily expense of organisation. The
remaining 10% of respondent out of 30 has opt for Past due receivable which means they are in
favour that it is one of the issue that manager has to face while managing capital. Therefore it
can be stated that manager need to plan strategies to overcome all the issue related to working
capital management for better outcome and achievements of end goals.
Theme 5: Nature of business and Credit allowed are two major factors that affect practice of
manager related to working capital management
What are several factors that affect practice of
manager related to working capital
management?
Outcome
Length of operating cycle 2
Credit allowed 13
Seasonal factor 3
Nature of business 11
36

Scale of operation 1
None of the above 0
Total 30
Interpretation: with the help of the primary data gathered from 30 different companies it is
evaluated that there are different factors which affect the practices of manager in respect to
working capital management. In accordance to the views of maximum of the participants that is
13 of 43% it is clear that I'm credit allowed is the major factor which affect the working capital
management. The major reason pertaining to the fact is bantam if the credit allowed is very high
then the working capital requirement of the company will be decreased. This is particularly
because of the reason that if the credit allowed is high then the cash inflow will be less and the
liabilities will not be paid off. The current assets minus current liabilities will be low. In addition
to this 37% of the total participant has stated that nature of the business also affects the working
capital management within the company. This is pertaining to the fact that if the company is of
manufacturing type then this will require a higher working capital. The major reason pertaining
to this fact is that these manufacturing units have to convert the raw materials into finished goods
and this will also involve selling on credit and managing and maintaining the inventory of raw
material for this they will require cash inflow. In case the business is of trading or the retail shop
37

then the requirement of the working capital will be very low. The major reason pertaining to this
fact is that they will not be much credit sales and this will result in proper cash inflow for the
company's. In comparison to this the wholesalers will require more working capital as they have
to manage the large stock and inventory and have to sell goods on credit. On the other hand some
of the respondents states that seasonal factor also affect working capital management. The reason
for 3 into this fact is that I'm if the business is of seasonal nature then in case when season as
hard then there will be high requirement of working capital full stop in contrast to this when the
season is not there of the product then the working capital need will be reduced. Along with this
some states that length of operating cycle also affects the working capital requirement. The
major reason for this is that if the length of operating cycle is high then there will be high need of
working capital and vice versa.
Theme 6: Yes, the working capital management impact on business operation
Does the working capital management
impact on business operation?
Outcome
Yes 28
No 2
Total 30
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Interpretation: on the valuation of the data gathered from 30 respondents with help of
questionnaire it was clearly visible that I'm yes the working capital management impacts the
business operations to a great extent. The reason underlying this fact is that working capital assist
company in managing smooth operations of the company and to improve the earning and
profitability of business. In addition to this when the working capital will be effective than the
flow of money within the company will be accurate and proper. As a result of this the
performance of the company will increase. On the other hand remaining respondent does not
agree to this and states that working capital management has no impact of business operations.
Hence in accordance with Ujah, Tarkom and Okafor (2020) it is evaluated that the working
capital management impacts the business operations to a great extent. Increase the working
capital is negative then this will negatively impact it operational performance of the company.
On the other hand if the working capital will be positive then this will improve the working
capabilities and efficiencies of the company to a great extent. It is supported by different authors
that I'm when the working capital is effectively used then this will definitely result in increase
and profitability of the company as the company is in position to manage its current asset and
liabilities in effective manner.
Theme 7: Increase company profit margin and company have sufficient cash to meet short term
liabilities and obligations are two impact of working capital management on company.
What are the impacts of working capital
management on company?
Outcome
Increase company profit margin 10
Have sufficient cash to meet short term
liabilities and obligation.
14
Lead in growth of company 3
Contribute in building brand image 2
All of the above 1
39

Total 30
Interpretation: The concept of working capital management has several positive impacts on
company that helps in attaining its objective. The table has help in understanding that there are
numerous impact of working capital such as increase in company profit margin, growth of
organisation, contribute in building brand image. Moreover, effective working capital
management has lead in sufficient cash management to meet short term liabilities and obligation.
There are around 47% has select that effective working capital management results in company
have sufficient cash to meet its short term obligation as well as liabilities. At the same time there
are 33% specify that working capital lead in increase in company profit margin as easily all
current asset and liabilities of firm are meet. Around 3% has selected all of the above options
which means that company enjoy all benefits such as sufficient cash, enhance company profit
and building brand image. Lead in growth and development of company has been selected by
10% of respondent which means that working capital management results in expansion of
business in external environment. At last it can be summarised from the above pie chart that 7%
has resulted in creating strong brand image of company through better management of current
40

liabilities and assets. Therefore, it can be stated that organisation needs to put its best efforts to
manage working capital so that it can enjoy maximum profitability and market share in food
industry.
Theme 8: Limited access to information and lack of formal structure are challenges that are faced
by manager in working capital management.
What are numerous challenges that are faced
by manager in working capital management?
Outcome
Limited access to information 12
Time constraints 2
Lack of formal structure 13
Too many stakeholder perspective 1
Any of the above 2
Total 30
41

Interpretation: This is another question that has been asked from manager of 30 different
companies in order to know about their perspective related to working capital management. The
manager has stated that there are number of challenges that they face while taking steps to
manage working capital of organisation for achievement of end objectives of company. Key
challenges that face by manager in managing current asset and liability of organisation are time
constraints, lack of formal structure, too many stakeholder perspective and limited access to
information. There are around 43% of respondent that has clearly specified that lack of formal
structure of capital lead challenges for manager to manage or handle daily working capital so
that all necessary expense of the company can be easily meet in limited time frame. Too many
stakeholders perspective have been selected by around 40% people that helps in understanding
that the manager face challenge for fulfil needs of each stakeholders in working capital
management of company. On the other hand there are only 7% of respondent that have selected
both any of the above option and time constraints respectively as challenge pertaining to working
capital management. There are plenty of works that manager need to accomplish so that
company can attained its objectives so due to time constraints it is not able to effective
management the working capital of company. Moreover, the above pie chart also represents that
the remaining 3% of respondent has specified that limited access to information pertaining to
working capital manager is also challenge. Therefore, manager of small companies need to
devote more efforts, time and energy in order to find alternative options that could be used to
effective manage the working capital of organisation for its growth and success in external
environment for longer time frame.
Theme 9: Most of the respondents have selected Agree options which means effective working
capital lead in achievements of company objective.
Do you agree that effective working capital
lead in achievements of company objective?
Outcome
Strongly agree 4
Agree 21
42

Neutral 3
Disagree 2
Strongly Disagree 0
Total 30
Interpretation: The above pie chart is related to the way working capital management lead in
achievement of company objective or not. The table as well as chart represent that there are
around 70% of individuals that is 21 out of 30 that has selected agreed option which means that
they are agree with the above statement. While there are 13% that has opt strongly agreed
options which also stated that the working capital lead in increasing profitability and attainment
of end goals. There are 10% that have neutral opinion towards the statement as neither they have
supported that working capital results in achievement of growth or not. From the perspective of
remaining 7% that has selected disagree option which means they are somewhat not agree that
working capital management assist company is achieving its objective in limited time frame. So,
it can be understand from the above analysis that manager by effective managing its capital can
retained and attained competitive advantages.
43

In addition to this it was supported by Singh, Kumar and Colombage (2017) when there is
effective working capital that will definitely need and achievement of objectives of company.
The reason pertaining to this fact is that when the working capital is management active manner
than company knows that how much current asset is available with the company in order to pay
off its current liabilities and other expenses. Hence this will provide a guiding to the employees
and then the employees can make strategies in accordance to the current asset available with the
company. And as a result of this the performance and productivity of the company will definitely
lead an achievement of the objectives of business.
Theme 10: Both 1 and 3 has been selected by the maximum number of respondents.
What are strategies that are used by manager
related to working capital management for
benefits of company?
Outcome
Management of debtors effectively. 3
Improve receivable process. 2
Payment of vendor in limited time frame. 4
Effective management of procurement and
inventory.
1
Both 1 and 3 20
Total 30
44

Interpretation: It can be stated that there are different strategies that are used by manager of
company to manage working capital of organisation for its benefits. The strategies that are
pursued by the organisation related to working capital management are effective management of
debtors, improvement in receivable process, effective procurement and management of inventory
and many more. 67% of respondent has chosen both 1 and 3 option that means most of the small
companies are making use of payment of vendor in limited time frame and effective management
of debtors to manage their current assets and liabilities. Such as there are 13% that has stated that
payment of vendor in limited time frame is the strategy that has been used for management of
capital. The 10% has also specified that management of debtors effectively also lead in best
utilisation as well as management of working capital of firm thereby leading more benefits to
company. While the remaining 7% and 3% respondent have clarified that improve receivable
process and management of procurement and inventory are respective strategies that are used by
manager of small companies to manage working capital so that company can enjoy high profit
margin. Therefore, the above study has helped in understanding that manager by making use of
different strategies is able to manage its current asset as well as liabilities for effective payment
of short term liabilities.
45

CHAPTER 5- RESULTS
With the above evaluation and analysis of the findings it was analysed factor working
capital is referred to as the difference between company's current assets with its current
liabilities. For a company that is very essential to manage the working capital so that the
company gets profitable and is in position to manage its day to day activities. The working
capital management is very essential for the company as it focuses on maintenance of enough
balance between the current asset and the liabilities of the company. When the working capital of
the company is good and effective when business is in position to cover all its financial
obligations that is current liabilities with its present current assets.
Management of working capital means managing the inventory is cash account payables
and account receivables. Efficient working of the capital management system undertakes the use
of performance ratios like working capital ratio inventory turnover ratio and the collection ratios
in order to identify that in which areas company is good and capable of managing is operations.
This is particularly because of the reason that with working capital ratio the company can
identify that I'm how much it is capable of using its current assets in order to pay off its current
liabilities. Along with this with help of the inventory turnover ratio the company can identify that
in how much time take and manage or turnover the inventory and on profit out of the inventory.
Moreover the collection period ratios help the company in identifying that in how much time the
data will clear of the debts with the company and then how much period of time the company has
to pay all its liabilities to their creditors.
As per the views of different authors it is clear that the success of the company is always
dependent over the working capital of the company. For the company it is very essential that
they manage the current assets and current liabilities as the operations of the company and
payment of all the expenses is totally dependent on these two aspects only. Hence when the
working capital is positive then it means that company is able to support all its day to day
operations or expenses in effective and efficient manner. With help of the proper working capital
management the company can ensure that there is proper liquidity within the company. The
liquidity is been defined as the ability of the company to convert its current assets into cash as
and when required. For any company it is very essential that they have high liquidity so that in
case of any emergency or contingency taken cell of their current assets and meet the necessary
46

requirement. Hence, when the working capital is effectively managed then the company has
good liquid.
On the other hand Seth, Chadha and Sharma (2020) argued that the major benefit or
advantage of using working capital management by the different food companies it assist
innovating interactions within the operations. The reason pertaining to this fact is that when the
working capital is managed effectively then in that case company has clear roles and
responsibilities relating to operations. The company knows that and operations how much money
will be used and how it will be allocated to the the different activities of operations. That this
will improve the working capacity of the company and as a result of this sum the efficiency will
improve. In contrast to this dash stated that I'm KFC makes use of working capital management
in order to improve their financial health.
As per the different secondary sources it was evaluated at KFC uses its working capital
management in order to increasing the financial health of the company. This is majorly because
of the reason that with help of working capital the company can identify that how much current
asset is available with the company after paying off all the current liabilities. Thus the company
can effectively make use of remaining current assets in order to manage other operations of the
business. Hence when this ideal amount is being utilised then this will definitely improve the
financial health of the company and will increase the acids and other profits of the company.
Further from the analysis of the collected data it was analysed that there are many
different issues which are related to working capital management which company faces. All the
companies within the food industry is like McDonald's KFC and other big food retailers faces
many difficulties or issues relating to management of the working capital. On the evaluation of
the primary data gathered it was analysed that majority of the companies face the issue of delay
in the payments to vendors. Hence this affects the working capacity or the working capital of the
company to a great extent.
In accordance with the views of Alvarez, Sensini and Vazquez (2021) it was evaluated
that ineffective management of current asset and current liabilities also creates issues and
difficulties for the company. In order to manage the working capital effectively it is the
responsibility of the company that they effectively manage current assets and current liabilities
and ensure that current liabilities never goes higher than the current asset. Furthermore it was
47

argued by my friend that poor inventory management also leads to ineffective management of
working capital. This is pertaining to the fact that when the inventory is not managed in
appropriate manner then company is not able to sell the the product on earn good amount of
profit and cash inflows and as a result of this if cash inflow will not be there then company will
not be in position to pay of it current liabilities. Thus this will result in ineffective management
of the working capital.
In addition to this it was also evaluated that there are many different factors which
effective practices adopted by manager with respect to working capital management. In
accordance with the views of Afrifa and Tingbani (2018) it was evaluated that maximum factor
which affect the manager practices is the credit allowed to the creditors. This is pertaining to the
fact that when the credit allowed is higher then there are fewer chances that the amount will be
recovered soon from the creditors. Does when the amount will not be recovered speedily then
this will affect the cash inflows of the company and will increase the working capital in negative
manner.
Moreover Ujah, Tarkom and Okafor (2020) articulated the fact that nature of the business
is also a major factor which affects the practices selected by manager in order to manage the
working capital of the company. This was articulated by the author because if the nature of
business is of manufacturing then the working capital requirement will be very high on the other
hand if the nature of business is of retail then the working capital requirement will be low. Hence
the practices builder firm in accordance with the nature of the business. In contrast to this some
of the authors stated that the seasonal factor also affects the working capital requirement by the
company. In case the doctor sold by the company is high in demand in the season then the
working capital requirement will be high on the other hand if the requirement of the product is
low then the working capital will also be low.
Furthermore with the evaluation it was analysed atom working capital requirement of
working capital management impact the business operations to a great extent. The reason
underlying this fact is that when working capital is effective than companies able to manage the
liquidity and profitability in effective manner. Hence this improves the working capacity of the
company and improves the the profitability as well. Moreover it was analysed that there are
various impact which working capital management create over the company. With the views of
48

Singh, Kumar and Colombage (2017) it was analysed that having sufficient cash to meet the
short term liabilities and obligation is the major impact of working capital management over the
company. This is particularly because of the reason that when working capital is effectively
managed the company is definitely going to have enough cash to meet all its short term liabilities
in effective and productive manner.
In contrast to this Seth, Chadha and Sharma (2020) argued that increase in the company's
profit margin is the major impact of effective working capital management of the company. This
is pertaining to the fact that when the working capital is effectively managed than company is
able to improve its operations and as a result of this the profitability and profit margin of the
company will increase for sure.
Hence in the end it can be evaluated that effective and proper management of working
capital is very essential for the success of the company. The reason pertaining to the fact is that
I'm this effective management of working capital assist company in deciding that whether they
are having enough current assets in sharing of all the expenses or not. In case the company is not
having enough current assets then it will direct the employees or the management of the
company that they effectively increase the current asset.
Hence for this the company will make strategies in order to improve the current asset and
as a result of this the working capability or working capital of the company will increase. thus for
all the companies within the food industry with the small or big need to manage and maintain the
necessary capital requirement of the working capital so that its day to day operations and needs
can be met effectively. In case the company will effectively meet the day-to-day operations and
other requirements then this will definitely improve and increase the profitability of the
company.
49

CHAPTER 6- CONCLUSION, LIMITATION AND RECOMMENDATION
Conclusion
From the above analysis it can be summarised that manager by managing working capital
of company is able to help in growth and expansion of business. Furthermore, it can be
interpreted that manager by making use of strategies and overcoming the challenge is able to
effective manage the working capital. So, at last it can be stated that company through managing
the current asset and liabilities is able to contribute in achievement of end goals. Further with the
research it was analysed that framing email objective is the most essential aspect for the success
of the research. The reason pertaining to this fact is that if the aim and objectives are clearly set
then this will provide guidance to the researcher that how they have to conduct the search in
successful manner.
In addition to this the aim and objectives of the research also guide the researcher that I'm
whether they have successfully attained the objectives or not. Moreover with help of the
literature review section it was analysed that the working capital is very essential aspect for the
success of the company. From the LR section it was analysed that there are many issues which
result in causing negative effect on the working capital of the company. In addition to this there
are many different factors which affect the working capital management practices of the
company and which create negative impact over the company's profitability and liquidity.
Along with this the research methodology section outlined the fact that the qualitative
research is the most essential and important tool for making the research successful. The reason
behind this fact is that a qualitative study improves the theoretical knowledge and in depth
information relating to the research topic that is working capital in the present study. Along with
this it was analysed that use of both primary and secondary research is helpful for the business
and analysing and completing the research in successful manner. With help of the primary
research the researcher was able to take views of 30 different companies from food industry to
analyse the impact of working capital. In addition to this the secondary sources supported the
views of the primary respondent with help of different books articles journals and others.
50

Moreover with help of thing data analysis section it was analysed atom the managers
provide importance to working capital management for the growth and success of the companies
will stop the reason pertaining to this fact is that managers know that if they will not manage the
working capital effectively than this will affect the liquidity and profitability of the company for
stop in addition to this with data analysis section it was also analysed that delay in payment to
vendor and ineffective management of the current assets are also issues related to the working
capital management for stock these issues can the result in negative impact over the working
capital and overall company. For the IT analyse that major factor which affects the practices of
manager relating to working capital nature of the business and credit period allowed. Also it was
analysed that working capital management impact the business operation and profitability
manner. Hence in the end it can be stated that the working capital management is very essential
for the success of the company.
Research limitation
While conducting research there many different limitations which affects the success of
the research completion. This is particularly because of the reason that there are many different
limitations of obstacles which affects come within the process of completion of the whole
research. While conducting the research over the importance of working capital within the food
industry the major limitation identified or faced by the researcher was theme limited resources.
This was the major limitation because of the reason that already the resources are very less and
scares and the user of these resources are high in number. Hence it is very difficult to optimally
utilise all the resources in productive and effective manner so that it can be optimally used. In
addition to this another limitation was of the limited budget. The finance or money is the thing
which is necessarily required by the company or any researcher in order to complete the
research.
If the researcher is not having appropriate and complete budget then this will affect the
ability of resources to complete the study in profitable and successful manner. In addition to this
another limitation for the research is the time that is the time provided for the research was very
less and this affected the completion of the research. But then also the researcher tried to
complete the research on time by attending all the objectives. In addition to the time the
51

availability of the data is also a major limitation for the researcher to conduct the research in
successful manner. This is pertaining to the fact that there are different types of data being
available within the the research area full stop it is difficult for the researcher to make use of
reliable and relevant data relating to the research and which will outline in the successful
completion of the research. This can also limit the capability of researcher in completing the
research by analysing the valid and reliable data.
Recommendation
With the help of the evaluation it was evaluated that all the companies within the food
industry need to manage their working capital effectively. Hence for this some of the
recommendations are as follows-
 The first and foremost recommendation to all the food companies is to manage their
procurement and inventory on time. This is particularly because of the reason that when
inventory will be managed in effective manner than the working capital will also be
managed an effective manner. If there will be excess of stock then this will block the cash
and the ability of company to pay off there current liabilities. Effective working capital of
the company and for this the solution is to manage inventory effective manner per stop this
requires the companies to have procurement automation or other technologies relating to
inventory management.
 Along with this another major recommendation is to pay of the vendors on time. this is
particularly because of the reason that went the payment to all the vendors order suppliers
will be made on time then this will improve the working efficiency of the company. In
addition to this liabilities will be paid off than it increases the hash capacity of the company.
 In addition to this another recommendation to all the small and big companies is that the
company need to improve the receivable process as well this is particularly because of the
reason that if the receivable process of the company will be good then the debts will be
cleared of on time and this will improve the cash inflow of the company. This is particularly
because of the reason that if the cash inflow will be good then it a company will be in
52

capacity to pay off all the current liabilities and this will improve the working capital of the
company.
 In addition to this, another way to improve the working capital of the company by food
companies is establish penalties for late payment by the creditors. This is necessary in
because of the reason that if penalty will be held over the late payments then creditors will
ensure that they submit for clear of the payments on time. Hence this will improve the
working capital of the company to a great extent.
 Along with this it is also advisable to the company that if they have a proper incentive
system to all the receivables then this will also improve the working capital of the company.
in case the company provide incentives to all the letters or the people who have made the
payment before time to the company then they should provide some discount or incentive.
Hence this incentive will motivate the debtors to clear of the payments before time and on
the incentives.
 In addition to all the recommendations it is also suggested to food companies that they must
consult with specialist or some expert within the field of working capital management. this
is essential for the success of the company as when companies will take guidance from some
export of professionals related to working capital management then this will provide some
productive results to the company and they can implement it in order to manage their
working capital.
53

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57

APPENDIX
Questionnaire
1. What does meant by working capital management?
 Business strategy to manage working capital of company
 To manage current liability and current assets to ensure short term liquidity of firm
 Both of the above options.
2. Does the manager need to give importance to working capital management for growth
and success of small business?
 Yes
 No
3. What are the benefits of working capital management for company?
 Ensure liquidity
 Ensure interruption in operation
 Improve financial health of company
 Contribute in value addition
 Enhance profitability of company
4. What are the different issue related to working capital management that lead in negative
working capital for organisation?
 Poor inventory management
 Past due receivable
 Delay in payment to vendor
 Ineffective management of current assets and liability
 All of the above
58

5. What are several factors that affect practice of manager related to working capital
management?
 Length of operating cycle
 Credit allowed
 Seasonal factor
 Nature of business
 Scale of operation
 None of the above
6. Does the working capital management impact on business operation?
 Yes
 No
7. What are the impacts of working capital management on company?
 Increase company profit margin
 Have sufficient cash to meet short term liabilities and obligation.
 Lead in growth of company
 Contribute in building brand image
 All of the above
8. What are numerous challenges that are faced by manager in working capital
management?
 Limited access to information
 Lack of formal structure
 Time constraints
 Too many stakeholder perspective
59

 Any of the above
9. Do you agree that effective working capital lead in achievements of company objective?
 Strongly agree
 Agree
 Neutral
 Disagree
 Strongly Disagree
10. What are strategies that are used by manager related to working capital management for
benefits of company?
 Management of debtors effectively.
 Improve receivable process.
 Payment of vendor in limited time frame.
 Effective management of procurement and inventory.
 Both 1 and 3
60