ASSESSMENT OF WORKING CAPITAL MANAGEMENT PRACTICES: THE CASE OF BOTTLED WATER COMPANIES IN ADDIS ABABA

Abstract

The main thrust of this study is to examine the working capital management practices of selected water bottled manufacturing companies in Addis Ababa, Ethiopia. A well designed and implemented working capital management is expected to contribute positively to the creation of firm’s values. The study used descriptive statistics for data analysis and presentation. The result of the study indicated that: initial source of budget for most of the bottled water manufacturing companies in Addis Ababa is bank loan even though few companies use self-financing, the shortest interval of time for which majority of the companies' firm utilizes cash budgeting is quarterly whereas it is monthly and weekly for few of the companies, companies use industry guidelines on the appropriate amounts to replenish their warehouses or other inventory storage points, availability of parts and materials is the most commonly used parameter to decide on replenishment quantities for inventory purchased by majority of the companies. It was also identified that technology, inventory management, employees' financial capability, credit policy, management, payable management, management system, organizational behavior, operational management/supply chain management, investment policy, management financial capacity, upstream collaboration, customer needs, financing requirements, supplier influence, shareholders wealth maximization and competitors' effect are the major internal and external challenges that influence the choice of WCM practices in bottled water companies of Addis Ababa. It was recommended that the companies should have effective payables management, Create a re-order level policy for their institutions that will create an enabling environment for them to request for the supply of moderate and high quality stocks and Thus, bottled water manufacturing companies under this study should emphasize on that predictor and put the above activities in to consideration to improve effectiveness of WCM practices of their company