ABSTRACT The study sought to establish the relationship between the working capital management practices and profitability of selected Small and Medium Enterprises (SME5) in Kampala, Uganda. The study was guided by four objectives namely; Determine the profile of the respondents in terms of age, gender, position, period of stay at workplace and highest educational qualification; Determine the extent of working capital components in the selected SMEs; To determine the level of liquidity and profitability of the selected Small and Medium Enterprises in Kampala, Uganda; And To establish the relationship between working capital management and profitability of SMEs in Uganda. The study utilized descriptive correlation survey design using questionnaire as the research instrument. A sample of 198 employees/owners of Small and Medium Enterprises were used as the respondents for the study. Purposive sampling method was used to identify the respondents. The data collected was analyzed using SPSS for means to determine level of dependent and the independent variables. Using the Pearson’s Linear Correlation Coefficient, the correlation between the two variables was determined. The study established that there is a high level of working capital management practices namely cash management, inventory management, accounts receivables management and accounts payables management among the selected SME5. The findings revealed that a significant relationship exists between working capital management and profitability of the selected SME5. The null hypothesis was rejected. The researcher recommends that SMEs take advantage of trade credit as a source of financing, seek to reduce the period debtors take to pay for their debts, the period it takes to receive cash after sales are made and the time it takes to sell off their stocks so as to increase their profitability.

TABLE OF CONTENTS

Preliminaries Page

Declaration A

Declaration B ii

Approval Sheet iii

Dedication iv

Acknowledgement v

Abstract vi

Table of content vii

List of tables x

Chapter

One THE PROBLEM AND ITS SCOPE 1

Background of the study 1

Statement of the problem 3

Purpose of the study 4

Research objectives 4

Research questions 5

Hypothesis 5

Scope of the study 5

vii

Significance of the study 6

Operational definition 7

Two REVIEW OF RELATED LITERATURE 9

Concepts, Opinions, Ideas, from authors /experts. 9

Theoretical perspectives 16

Related studies 18

Three METHODOLOGY 23

Research design 23

Research population 23

Sample size 23

Sample procedure 23

Research Instrument 24

Validity and Reliability 24

Data Gathering procedure 25

Data analysis 26

Ethical consideration 27

Limitations of the study 27

Viii

Four DATA PRESETANTION AND DATA ANALYSIS 28

Five FINDINGS, CONCLUSION AND RECOMMENDATIONS 43

Findings 43

Conclusion 46

Recommendations 47

Reference 48

Appendices 52

Appendix I Transmittal letter 52

Appendix II Authorization Letter 53

Appendix III Acknowledgement by Respondents 54

Appendix IV Clearance from the Ethics Committee 55