Do Marketing Expenses Moderate the Relationship Between Working Capital Management and Profitability?

Matiko Dickson Kisyeri; Alex Reuben Kira

Matiko Dickson Kisyeri Department of Accounting and Finance, College of Business and Economics, University of Dodoma
Alex Reuben Kira Department of Accounting and Finance, College of Business and Economics, University of Dodoma

Keywords: WCM, working capital management, WCFP, working capital financing policy, working capital investing policy, marketing expenses, profitability, DuPont, URT, United Republic of Tanzania

Abstract

This study examines the impact of working capital management (specifically working capital financing policy, working capital investing policy (WCIP), and marketing expenses (MKTEXP)) on the profitability of listed manufacturing companies (LMCs) in Tanzania using 84 observations from the 14 financial statements of the six LMCs from 2005 to 2018. A panel data regression analysis was conducted utilizing these variables, revealing a significant collective influence on profitability. However, only the constant term and working capital financing policy (WCFP) have a strong statistically significant relationship with profitability. The marketing expenses used as another predictor variable improves the collective relationship between the policies and profitability but as a moderating variable diminishes the relationship between explanatory variables and LMCs’ profitability. Considering the findings, this research recommends that, the companies should adopt a comprehensive approach to decision-making that takes into account the interplay between working capital financing and investing policies, alongside marketing strategies to improve profitability.