Nexus between Working Capital Management and Financial Performance of Small Enterprises

Abstract

This study investigates the impact of working capital management on the financial performance of small enterprises in Kano, Nigeria. A cross-sectional survey of small enterprises owners or managers in Kano was conducted through self-administered questionnaire. Variance-base structural equation modelling statistical technique called partial least square (PLS) version 4.0.9.5 was utilized to examine the relationship between working capital management and financial performance. The findings of the study indicate that working capital management has a statistically significant positive impact on financial performance of small enterprises. Specifically, the results show that small enterprises with higher working capital management have better financial performance in terms of sales growth, profitability, liquidity, solvency, and return on assets. The study offers useful recommendations to small business operators and suggests interesting direction for future research.