The effect of credit management on company profitability: case study selected manufacturing companies in Garowe Puntland Somalia
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Date
2011-04
Authors
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Publisher
Kampala International University; College of Economics and Management
Abstract
The study investigated the relationship between the credit management and company profitability in selected manufacturing companies in Garowe Puntland, Somalia with the objectives of determining the level of credit management in selected manufacturing companies in Garowe Puntland Somalia, to determine the level of profitability in selected manufacturing companies in Garowe Puntland Somalia and to establish the a relationship between the level credit management and level of profitability in selected manufacturing companies in Garowe Puntland Somalia. The study used a descriptive correlation quantitative design focused on two (2) manufacturing companies in Garowe Puntland Somalia consisting of a total population of 40 company staff consisting of finance managers and customers. A sample of 36 respondents was selected using simple random technique. The data collection method used was questionnaire. Data analysis techniques of frequency, percentages, mean and correlation analyses were used as found appropriate. The study found that the companies controls credit management through proper procedure by applying effective credit policies, credit terms, credit limits, credit standards credit period, credit discounts, and collection procedure, The findings showed that the most respondents agreed that credit management process plays great role the collection of sales revenue and if this system is poor or weak, company will not be able to collects its overdue accounts effectively and efficiently and the study found that there is a significant relationship between credit management and profitability. The findings indicated the relationship between credit management and profitability is weak positive correlation which means there is a relationship between these two variables but it is not strong. Therefore the Null hypothesis was rejected. The study recommended that the finance manager should maintain that accounts credit management model that the firm uses currently and also should improve the risk management model which is currently weak, The finance manager should supervise whether credit terms, credit limits, credit period are clear stated both informally and formally. Because as Somalis, we are oral society, so, the finance manager should closely consider that, The finance managers should come up with other strategies to satisfy customers about model of managing accounts receivable because as table 4.5 reveals that the customers are dissatisfied how they accounts receivable handled, offered. But as accountants our concern is not that (customers satisfaction), our concern is level of profit being generated by the firm and The finance manager should main and update as environment changes the technique and tools of billing can collection procedure that the firm uses currently because they are strong as the respondents agreed.
Description
A research report submitted to the School of Business and Management in partial fulfillment of the requirement for the Award of a Bachelor's Degree of Business Administration of Kampala International University
Keywords
Credit management, Company profitability, Manufacturing companies, Garowe Puntland, Somalia