Poor Working Capital Management Remain Major Cause of Business Failure
Abstract
Businesses must manage their working capital well since it affects their resilience and profitability. Liquidity and profitability must be balanced. Sustaining sufficient operating capital guarantees operational stability and on-time payment of debts. Shortening the cash conversion cycle and increasing efficiency maximizes cash flow. This approach provides advantageous lending terms and increases credibility with stakeholders. Conversely, poor working capital management can lead to cash flow issues, increased costs, and missed opportunities. Overtrading brought on by low liquidity might jeopardize financial stability. To secure a business’s long-term success in the face of changeable market conditions, regular assessments and adaptable plans are essential. Thus, this study focuses on the effects of poor working capital management resulting to business failure.
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Cash flow is maximized by reducing the cash conversion cycle and improving efficiency.
“Cash flow is maximized by reducing the cash conversion cycle and improving efficiency (Alade 2024).”
From Working capital management impact on Zimbabwe’s listed consumer services firms’ profitability and the influence of external factors via governance policy (2025) · cites this paper as Alade 2024
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Cosima, T., Ahmed, E. M., & Elfaki, K. E. (2025) · Quality & Quantity · doi:10.1007/s11135-025-02250-3
ASSESSING THE PROFITABILITY OF SMALL AND MEDIUM-SIZED WOOD FURNITURE BUSINESSES IN ETHIOPIA
Kaba, G., & Belachew, A. (2024) · Journal of Social Sciences · doi:10.52326/jss.utm.2024.7(2).01
“It was claimed that MSEs' incapacity to use financial statement analysis, funding shortfall, unplanned withdrawals of money for personal use, and poor working capital management are all contributing factors to their decreasing profitability [17].”
BackgroundKadri, M., Muzaiyana, Z., Satria, W., et al. (2025) · Indatu Journal of Management and Accounting · doi:10.60084/ijma.v3i2.353
“Alade [25] emphasizes that poor working capital management remains a major cause of business failure, as insufficient liquidity can disrupt operations and lead to financial distress.”
- Authors
- Alade, T. A.
- Corresponding author
- Alade, Tesleem Adelodun
- Venue
- International Journal of Research and Innovation in Social Science
- Publisher
- RSIS International
- Published
- 2024
- Volume
- VIII
- Issue
- I
- Pages
- 1120-1124
- ISSN
- 2454-6186 (ISSN-L)
- OpenAlex
- W4391581880
- Cited by
- 3
- References
- 0
- Citations by year
- 2025: 2 · 2024: 1
- FWCI
- 2.99
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- International Journal of Research and Innovation in Social Science (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Business, Management and Accounting › Accounting › Working Capital and Financial Performance
- Social Sciences › Business, Management and Accounting › Management Information Systems › Supply Chain and Inventory Management
- Social Sciences › Business, Management and Accounting › Accounting › Financial Analysis and Corporate Governance
- Keywords
- working capital management, business failure, liquidity, profitability, cash conversion cycle, cash flow, overtrading, financial stability, debt repayment
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