Effect of Working Capital Management on Business Solvency and Growth. A Case Study of Small and Medium Enterprises in the Manufacturing Sector In Kitwe District

This research study focused on the effects of working capital management (WCM) on the performance of small and medium enterprises (SMEs) in the manufacturing sector of Kitwe District, Zambia. The main objective of this study was to examine the effect of WCW on solvency and growth. The results from the Chi-square showed a strong significant relationship across all objectives, with p-values less than 0.05, which lead to the rejection of the null hypotheses. WCW had a very strong influence on solvency with a Pearson correlation of (r = 0.920, p = 0.000) showing that factors like efficient management of receivables, payables, and inventory have an effect on the strength of the long-term financial stability of SMEs. On the other hand, growth showed the strongest relationship with WCW with a correlation of (r = 0.959 (p = 0.000), this clearly shows that firms that effectively manage working capital are well prepared and positioned to expand their business operations and also increase market competition. This study concluded that WCW is an important factor for SMEs going concern and it acts as a source of resilience in the areas of solvency and general business growth. A well-blended working capital management framework secures continuity and efficiency. The findings in this study have highlighted that while the benefits are obvious, the adoption of best practice is low and hence it is recommended that business forums should be established to increase capacity building in SMEs and deliberate services to offer training and guides in the use of capital management practice must be available.