TABLE OF CONTENTS
DECLARATION
APPROVAL
DEDICATION •
ACKNOWLEDGEMENT
LIST OF ABBREVIATIONS AND ACRONYMS
ABSTRACT
CHAPTER ONE • 1
INTRODUCTION 1
1.0 Introduction 1
1.1 Background to the Study 1
1.1.2 Theoretical Background 3
1.1.3 Conceptual Background 3
1.1.3 Contextual Background 3
1.2 Problem Statement 3
1.3 Purpose of the Study 4
1.4 specific Study Objectives 4
1.5 Research Questions 4
1.6 Scope of the Study 4
1.6.1 Subject Scope 4
1.6.2 Geographical Scope 5
1.6.3 Time Scope 5
1.6.4 Significance of the Study 5
1 .7.Conceptual framework 6
CHAPTER TWO 8
LITERATURE REVIEW 8
2.1 Introduction 8
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2.1.1 Foreign Exchange Fluctuations .8
2.1.2 Brief History of Foreign Exchange 8
2.2. Theoretical Review 9
2.1.3 Participants of a Foreign Exchange Market 10
2.2 Causes of Exchange Rate Fluctuations 11
2.2.1 Economic Fundamentals i 1
2.2.2 Flight to Safety 12
2.2.3 Balance of Payments (BOP) 12
2.2.4 Political Developments 12
2.2.5 Government Policy 13
2.2.6 Speculation 13
2.2.7 Market Sentiment 13
2.2.8 Relative Inflation Rates 14
2.2.9 Exchange Rate Policy and Intervention 14
2.3 Profitability of Manufacturing Industries 15
2.3.1 Profitability Indicators 15
2.3.2 Gross Profit Margin Percentage 15
2.3.3 Return on Capital Employed (ROCE) 15
2.3.4 Gross Profit Margin Ratio 15
2.3.5 Factors Affecting Profitability of Business Organizations 16
2.3.6 Degree of Competition of a Firm 17
2.3.7 Strength of Demand 17
2.3.8 State of the Company 17
2.3.9 Availability of Substitutes 18
2.3.10 Degree of Costs 18
2.3.11 Price Discrimination 18
2.4 The Relationship between Exchange Rates and Profitability 19
2.6 Conclusions 20
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CHAPTER THREE .21
METHODOLGY 21
3.0 Introduction 21
3.1 Research design 21
3.2 Population 21
3.3 Sampling techniques 21
3.4Sarnple size 21
3.5 Data Sources 22
3.5.1 Primary Sources 22
3.5.2 Secondary Sources 22
3.6 Data Collection Methods 22
3.6.1 Observation 22
3.7 Instruments of Data Collection 22
3.7.1 Questionnaire 23
3.7.2 Secondary Data Collection Instruments 23
3.8 Data Processing, Analysis and Presentation 23
3.8.1 Data Processing 23
3.8.2Data analysis 23
3.8.3 Data presentation 23
3.9 Reliability and Validity of the Instruments 24
3.9.1 Reliability 24
3.9.2 Validity 24
3.1.0 Limitations of the Study 24
CHAPTER FOUR 25
PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS 25
4.0 Introduction 25
4.1 Demographic Characteristics of Respondents 25
Table 4.1.1 Sex of respondents 25
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Table 4.1.2 Age of respondents .25
Table4. 1.3: Religion of Respondents 26
Table 4.1.4 Marital status 26
Table 4.1.5 Period of stay with Mukwano industries limited 26
4.2 Foreign Exchange Rate Fluctuations 27
Table 4.2.1 Predictability of Uganda shilling against dollar 27
Table 4.2.2 Reasons for unpredictability of Uganda shilling against dollar 27
Figure 4.1 Fluctuation of Uganda Shilling Against the Dollar 28
Table 4.2.3 Reasons for the Shilling Fluctuation against a Dollar 28
Table 4.2.4 Causes of Exchange Rate Fluctuations 29
4.3 Level of Profitability of Mukwano Industries Limited 30
Table 4.3.1 Measuring Profitability in Mukwano Industries Limited 30
Table 4.3.2 Factors that affect the Profitability of Mukwano Industries Limited 30
Table 4.3.3 Consistency of Profitability in Mukwano Industries Limited 31
Table 4.3.4 Reasons for the Inconsistency of Profitability in Mukwano Industries Limited 31
Table 4.3.5 Other Factors that affect the Profitability of Mukwano Industries Limited.32
4.4 Relationship Between Exchange Rates and the Profitability of Mukwano Industries limited 33
Table 4.4.1 ANOVA table showing whether there is a relationship between exchange rates and profitability of manufacturing industries 33
Table 4.4.2 Correlation Analysis 33
4.4.2 Regression analysis 34
Table 4.4.3 Regression Analysis 34
Table 4.4.4 How Exchange Fluctuations affect Profitability of Mukwano industries Limited 34
CHAPTER FIVE 36
SUMMARY OF FINDINGS, CONCLUSION, RECOMMENDATIONS AND AREAS FOR FURTHER STUDY 36
5.0 Introduction 36 ix
5.1 Summary of Study Findings .36
5.1.1 Findings on Causes of Foreign Exchange Rate Fluctuations 36
5.1.2 Findings on Determinants ofProfitability in Mukwano Industries limited 37
5.2.3 Findings on the Relationship Between Foreign Exchange Fluctuations and Profitability of Mukwano Industries limited Limited 37
5.3 Conclusion 38
5.4 Recommendations 38
5.5 Areas for further research 39
REFERENCES 40
QUESTIONNAIRE FOR EMPLOYEES 42
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ABSTRACT
The purpose of the study was to establish the effect of foreign exchange rates on profitability of manufacturing industries a case study of Mukwano Industries Ltd and the specific objectives were to find out the causes of foreign exchange rate fluctuations, establish the determinants of profitability and establish the relationship between foreign rate and profitability of Mukwano Industries limited. The research design that was used in carrying out this research was a cross sectional research design which involved a descriptive research design. The population of the study included the employees of Mukwano Industries Ltd, 80 respondents were selected using purposive sampling design. Data was collected using primary and secondary source. The findings revealed that differentials in interest rates, terms of trade and high level of inflation cause exchange rate fluctuations, sales volume determine the profitability levels of the company and that profitability of the export company is dependent on foreign exchange fluctuations which implies that unfavorable fluctuations affect profits negatively whereas favorable fluctuations affect profits positively. It is concluded that, exchange fluctuations are related to the profitability of the company and unfavorable fluctuations affect profits negatively whereas favorable fluctuations affect profits positively The study recommended that investors should have some understanding of how currency values and exchange rates play an important role in the rate of return on their investments. More so, manufacturing companies need to adopt and start using a ‘Forward Contract’ to reduce the effect of fluctuations on their businesses.
