Cash management and profitability in selected commercial banks in Bujumbura, Burundi
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Date
2019-09
Authors
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Journal ISSN
Volume Title
Publisher
Kampala International University, College of Economics and Management
Abstract
There is low level of profitability among most commercial banks in Burundi. This was attributed to the fact that most commercial banks have been making losses in their return on assets and return on equity. The study was investigated the effect of cash management and profitability in selected commercial banks in Bujumbura, Burundiā. The purpose of the study was to evaluate the effect of cash management on the profitability in selected commercial banks. The study was based on three specific objectives; to examine the effect of cash control on profitability in selected commercial banks, to analyze the effect of cash budget in selected commercial banks. The significance of the study is to understand the current framework of the cash management in selected commercial banks in Burundi and how it affects profitability. The study adopted a descriptive cross-sectional design, with the study population comprised of 58 employees of three selected commercial banks. Data were collected using questionnaires, and the data collected was analyzed using descriptive and regression analysis to determine the effect of cash management on profitability in selected commercial banks. The study revealed cash control significantly affects profitability of commercial banks in Burundi (Adjusted R Square=0.212, p=0.00). The study further revealed that cash budgeting significantly affects profitability of commercial banks in Burundi (Adjusted R Square=0.394, p=0.00). Additionally, the study revealed that there is a positive and significant relationship between cash management and profitability among selected commercial banks in Bujumbura (r=.708**, p=0.00). The study concluded that that both cash control and cash budgeting have significant effect on profitability, while cash management have a positive relationship have a significant relationship with profitability. The study makes the following recommendations: the management of commercial banks should encourage the use of net cash balance, cash inflows, and cash payment so as to accurately understand the dynamics of their profitability; furthermore, the management of commercial banks in Burundi should always emphasize accurate forecasts of both short term and long term cash budgeting plans so as to determine profit level; lastly, the management of commercial banks should emphasize the proper use of cash management since it is essential to every business that desires to meet up with its short term financial obligations. The study adds to the body of knowledge by measuring cash management using cash control and cash budgeting, and profitability using performance ratio. The study found a positive effect of cash control and cash budgeting on performance ratio. This study therefore closes both the contextual and content gaps of the previous studies in the banking industry in Burundi.
Description
A research report submitted to the College of Economics and Management in partial fulfillment of the requirements for the award of a Masterās degree in Business and Administration of Kampala International University
Keywords
Cash management, Profitability, Commercial banks, Bujumbura, Burundi