THE IMPACT OF ACCOUNTS PAYABLE MANAGEMENT IN ENHANCING LIQUIDITY OF THE ENERGY SECTOR COMPANIES IN GHANA

Stephen Gbambil Tobazaa - Accra Institute of Technology (AIT), Department of Business, Accra, Ghana

John Gartchie Gatsi - University of Cape Coast, Ghana

ABSTRACT

This study examines the impact of accounts payable management on the liquidity of energy sector companies in Ghana, focusing on two key indicators: Days Payables Outstanding (DPO) and Accounts Payable Turnover (APT). Using a quantitative research approach and secondary data extracted from published annual reports of selected firms between 2014 and 2022, the study also evaluates the moderating role of the Cash Conversion Cycle (CCC) in the relationship between payables practices and liquidity, measured through the Current Ratio (CR) and Quick Ratio (QR). Descriptive statistics reveal considerable variability in payables and liquidity practices, with some firms exhibiting extremely high DPO and APT values. Correlation analysis indicates a strong positive relationship between APT and both liquidity measures, while DPO shows a weak negative correlation. Regression results affirm that APT significantly enhances both QR and CR, especially when moderated by a longer CCC, underscoring the importance of proactive and timely payables turnover in liquidity management. In contrast, DPO and CCC alone do not significantly influence liquidity. The findings suggest that merely extending payment periods is insufficient for improving liquidity. Instead, strategically managing APT, particularly under extended working capital cycles, offers more sustainable liquidity benefits. The study recommends that energy firms in Ghana adopt APT as a key performance indicator and align payment schedules with operational cash flows to enhance financial stability and supplier relationships.

Full Length Research (PDF Format)