Aspects of working capital management in selected medium-sized enterprises in Malta

Abstract

Purpose: The primary aim of this study is to find out the actual situation of working capital management in medium-sized enterprises in Malta, and subsequently to identify areas of improvement in order to help such enterprises avoid failure and foster growth. Therefore, the study includes the following objectives: 1. To analyse and assess how medium-sized enterprises in Malta apply working capital management and the degree of importance they give to it; 2. To identify the advantages that can accrue to medium-sized enterprises applying effective working capital management; 3. To contrast enterprises which give importance to working capital management with those which do not. Design: First, a thorough literature review was needed which included the study of different but inter-related topics. Then primary data was collected through qualitative interviews with members of the finance team from a sample of medium-sized enterprises in Malta and with a senior bank official. Findings and Conclusion: This study shows that medium-sized enterprises in Malta are aware of the great importance of effective working capital management, but more importance needs to be given to it. This resulted from the interviews carried out with officials of such enterprises and the bank. Although enterprises know that by controlling the aspects of working capital-cash, stock, debtors and creditors- the enterprise can benefit from various bank facilities, they still opt to increase their profits rather than improve their liquidity. Value: This study’s purpose was to create awareness among medium-sized enterprises of the importance that should be given to working capital management. Such enterprises proved that they are not knowledgeable enough about the subject and therefore need to consider the various options recommended such as training and a continuous education on this topic. In this way they would be able to reduce the risk of failure and foster growth.