WORKING CAPITAL MANAGEMENT AND FINANCIAL PERFORMANCE OF ENERGY AND PETROLEUM FIRMS LISTED AT THE NAIROBI SECURITIES EXCHANGE, KENYA
Abstract
This study examined the impact of working capital management on the financial performance of energy and oil institutions registered on the Nairobi Securities Exchange. A null hypothesis was tested. Descriptive study procedure was employed. Group targeted was 367 personnel in the energy and oil sector. This study used stratified sampling to select 191 employees to participate in the study. The research period was from 2016 to 2020. Controlled questionnaire was the source of primary information. Monetary performance related to return on equity was collected using data abstraction tools as the secondary information. Therefore, this study was based on ethical considerations. Alternative hypothesis was accepted and a rejection of null hypothesis that accounts receivable, inventory, cash, and payables have an impact considered substantial on financial performance of NSE registered oil and energy businesses was accepted. The study concluded that debtors make up a significant portion of the working capital of organizations and companies. These organizations and companies use liabilities in their financial structures to create financial leverage that allows them to increase their return on investment if the revenue generated exceeds their costs. A liability can be amortized as an expense. Inventory management is not only tedious, it is a difficult task. Inventory of all kinds represents a significant part of a company's capital, so the success or failure of a business depends heavily on how inventory management evolves. The management of an organization is responsible for retaining and managing cash when making investment decisions that affect the company's operations and improve its financial performance. A precondition for a company's financial solidity and continued success is having in place a credit management system that is sound. The study recommended that companies should implement effective accounts receivable management systems to impact financial performance. Without proper inventory management, companies can overstock products, which not only results in lost cash flow, but also risks holding dead stock that can become obsolete. An organization should ensure the financial solvency and stability of an organization as it is the procedure in collecting money, observing monies and using projects to invest in, which are a key factor affecting financial performance must have a strict cash management policy. Appropriate credit management systems that improve financial performance to reduce debt-bound capital and reduce the chances of encountering bad debts.
Key Words:Accounts Receivable, Inventory, Cash, Accounts Payable
CITATION: Olambo, T. C., & Aluoch, M. O. (2022). Working capital management and financial performance of energy and petroleum firms listed at the Nairobi Securities Exchange, Kenya. The Strategic Journal of Business & Change Management, 9 (4), 288 - 310.
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DOI: http://dx.doi.org/10.61426/sjbcm.v9i4.2413
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