The Impact of Efficient and effective Management of Working Capital on the financial performance of Industrial Companies A Case Study of Sudanese Sugar Company

Abstract

This research intends to assess the impact of efficient and effective working capital management as an essential requirement for a healthy and profitable company. However most of the Sudanese industrial companies are affected by some working capital problems which hinder the progress of these companies to achieve their targeted goals. The problem identified in this study, can be summarized; as insufficiency of working capital, Liquidity problems and the use of inefficient working capital practices by the management of the selected firms. In order to provide a framework to investigate and resolve such problems the following main hypotheses have been formulated: • Proper management of working capital involves planning and control of working capital components. • Adoption of efficient and effective working capital management techniques and polices, improves the firm’s financial and operational performance. The findings of the study have confirmed these hypotheses and there upon the following recommendations were made. 1. Planning of working capital should incorporate all limiting factors, such as finance, production volume, raw materials, and market share. 2. Cash budget should be employed for planning and controlling firm’s cash and liquidity position. 3. The level of investment in debtors and stocks should be determined on the basis of the availability of liquidity. 4. The inventory items should be classified according to the relative priority plan and the stock order level is to be maintained to ensure availability and cost control. 5. Financing of working capital is to be strictly identified and evaluated according to advanced analysis techniques in order to select the best appropriate financing alternative.