Financial Management Practices and Profitability of Business Enterprises in Obuasi Municipality, Ghana

Abstract

Literature is divided on the attribution of financial management practices on the profitability of business enterprises. This study, therefore, used empirical data, collected from ninety-eight enterprises in the Obuasi Municipality (Ghana), to investigate the impact of financial management practices on profitability of business enterprises. The study focused on two financial management practices, namely; working capital and capital budgeting management. The study confirms that the working capital and capital budgeting management were contributing to the variance of profitability measured by profit margin and return on sales. The analysis of the collected data, however, revealed that working capital management has a positive and significant effect on the profitability of business enterprises but capital budgeting management has a negative relationship with the enterprises profitability. The findings further showed that cash management theories have not been fully enforced by  the enterprises in the Obuasi Municipality. The researchers therefore, recommend that financial managers should pay much attention to their financial management practices due to its positive effect on profitability of their firm.

Keywords: financial management, working capital, capital budgeting, profitability, business enterprise, Ghana