Exchange rates and the profitability of manufacturing industries in Uganda :

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Kampala International University, College of Economics and Management
The purpose of the study was to establish the effect of foreign exchange rates on profitability of manufacturing industries a case study of Mukwano Industries Ltd and the specific objectives were to find out the causes of foreign exchange rate fluctuations, establish the determinants of profitability and establish the relationship between foreign rate and profitability of Mukwano Industries limited. The research design that was used in carrying out this research was a cross sectional research design which involved a descriptive research design. The population of the study included the employees of Mukwano Industries Ltd, 80 respondents were selected using purposive sampling design. Data was collected using primary and secondary source. The findings revealed that differentials in interest rates, terms of trade and high level of inflation cause exchange rate fluctuations, sales volume determine the profitability levels of the company and that profitability of the export company is dependent on foreign exchange fluctuations which implies that unfavorable fluctuations affect profits negatively whereas favorable fluctuations affect profits positively. It is concluded that, exchange fluctuations are related to the profitability of the company and unfavorable fluctuations affect profits negatively whereas favorable fluctuations affect profits positively The study recommended that investors should have some understanding of how currency values and exchange rates play an important role in the rate of return on their investments. More so, manufacturing companies need to adopt and start using a ‘Forward Contract’ to reduce the effect of fluctuations on their businesses.
Research report submitted to the college of economics and management in partial fulfillment of the requirements for the award of a Bachelor of Science in Statistics of Kampala International University
Exchange rates, profitability, manufacturing industries, Mukwano Industries Limited