An Examination of Sound Working Capital in Relation to Own Income and Liquidity Capacities of Local Government Authorities in Mara Region, Tanzania

Abstract

This study, examined sound working capital strategies in relation to own income and liquidity capacities of local government authorities in Mara region.The Study involved six local government authorities which included Tarime, Musoma Municipality, Musoma District Council,Serengeti, Rorya and Bunda. Mixed approach, qualitative and quantitative, that applied a survey design was used. A sample of 66 respondents, 54 accountants and 12 external auditors, was reached to collect data through structured and semi structured questionnaires.

The quantitative data was analyzed using Karl Pearson Coefficient of Correlation whereas the qualitative data was analyzed by descriptive analysis to show frequencies and percentages.The findings indicate that there is a negative relationship between the sound working capital strategies and own source income and liquidity capacities of the LGAs. It was also found that, if the LGAs would improve on the current assets levels, own income and liquidity capacities would be optimized.The study recommends the government to take interest on the topic to conduct more researches. The LGAs are advised to be result oriented to stick on building structures instead of concentrating on recurrent payments, to see the possibility of introducing municipal bonds, to apply the strategy of matching liabilities and assets and to apply the current ratio of 2 to 1 and quick ratio of 1 to 1 to avoid excessive cash that would be invested to reap more own source revenue.

Keywords: LGAs own Income,,LGAs Liquidity capacities, Sound working capital Management, Working capital