Augmenting the Working Capital Management Strategies for Profit Optimization in Tobacco Industry: A Case of Tanzania Cigarette Company

Abstract

The study assessed the strategies for effective working capital management (WCM) practices for Tanzania Cigarette Company (TCC). Both qualitative and quantitative research analysis were carried out in the context of the tobacco industry in Tanzania, by examining the current working capital management strategies, the study seeks to recognize possible accurate necessities for improvement of return on equity (ROE) to shareholders of TCC. Data were collected from TCC headquarters in Dar es Salaam and analyzed using panel data technique with the aid of STATA version 14.2 software. Descriptive statistic, correlation, linear regressions, and multicollinearity tests were carried out. ROE is revealed to be positively correlated with cash conversion cycle (CCC) and inventory turnover period (DI but negatively associated with account payable days (APD) and account receivable days (ARD). Results are positively related with (CCC, ARD and DI), though negatively correlated with APD. Relationship between CCC and ROE (Regression coefficient of 0.02) implying the rise or decline in CCC affects the profitability. The impact of ARD on the firm’s profitability were positive (t = 0.790; 95% confidence level). APD had a regression coefficient of (−0.079) with p-value of (0.413). The regression coefficient between inventory turnover period and ROE was positive (0.0266) which is not statistically significant but ROE is positively correlated with CCC and DI. TCC has to develop appropriate WCM strategies to attain short-term financial obligations. Further studies needed to focus on social, environmental and economic impacts from tobacco products.