Williams Kwasi Peprah is currently a Ph.D. in commerce candidate at the Adventist University of the Philippines. Williams has BBA in Accounting, an MBA in Finance, a Fellow and a Chartered Financial and Investment Analyst, Investment Advisor in the Security Industry of Ghana and Ghana Stock Exchange, Certified Green Belt in Six Sigma for lean operations and Internal Auditor for Integrated Management System and also the Managing Director of PWP Reservations Limited, Managing Advisor and Training of PWP Advisory and Training and a part-time lecturer at Valley View University.
Riziki Agnes is an Adventist university of the Philippines PhD student in commerce, major in accounting and finance.  She holds Master‘s degrees in Economics Sciences major in Financial Management at Catholic University of Butembo (UCG).she is a certified public account who has worked in both hospital and corporate setting in Democratic republic of Congo. She also worked as accountant in a non-governmental organization, child for the future and development (EADEV). Currently, she teaches as permanent lecturer in statistics, financial mathematics, mathematics of insurance and accounting at college of business (ISC-Butembo) in Democratic republic of Congo. Her research areas include organizational performance, human capital, operational risk management and management control system.

Williams Kwasi Peprah and Agnes Riziki

Adventist University of the Philippines

Abstract

From 2017 to 2019, nine indigenous owned banks have collapsed and were consolidated by the Bank of Ghana. Most of these banks reported profitability and won awards with them but were receiving liquidity support from the Bank of Ghana. This study aimed to examine the relationship between working capital and profitability of 25 commercial banks in Ghana from 2016-2018. A panel data methodology was used. The data were obtained from the Bank of Ghana to study the correlation between working capital and profitability. The liquidity ratio of current ratio and cash ratio represented working capital management, and profitability was measured by the return on asset of the banks. The findings of the study revealed that there is a small significant negative relationship between working capital management and profitability. This confirms the financial rule of thumb that working capital is inversely related to profitability as high working capital will cause profitability to be low and vice versa. This indicates that higher assets reduce profitability, and increasing debt withdrawal, which further declines the profitability. The study recommends to banks in Ghana to seek equilibrium on working capital and profitability to prevent a possible collapse. 

Keywords: working capital, profitability, liquidity, current ratio, cash ratio