LIQUIDITY MANAGEMENT ON FINANCIAL PERFORMANCE OF TEA EXPORTING COMPANIES IN MOMBASA, KENYA
Abstract
This study investigated the effect of liquidity management on financial performance of tea exporting firms in Mombasa County, Kenya. The study adopted cross-sectional descriptive survey research design. According to Tea Board of Kenya (2021) in Mombasa there are 23 licensed large scale tea exporting firms. Thus the current study targeted all 23 large scale tea exporting licensed by Tea Board of Kenya and operating within Mombasa Island. The unit of analysis was finance executives of all 23 large scale tea exporting firms which are 23. The study utilized census technique since the target population is small. The study utilized primary data collected by use of structured closed-ended questionnaires. Secondary data was used from financial reports of the target tea export firms. Pilot test was conducted on data collection tools to establish validity and reliability. On data analysis, descriptive statistics and inferential statistics were employed to analyze collected data. Statistical Package for Social Science (SPSS) was the data analysis tool. Analyzed data was presented by use of frequency and descriptive tables. The study findings revealed that accounts receivable period, payable deferral period, inventory conversion period and cash flow planning have significant effect on financial performance. The tea export firms’ receivables collection policies are set to assist in reduction of bad debts and the length of credit period to customers has an influence on sales. The firms have receivables management policies to regulate the credit allowed and recovery of debtors. The companies monitor accounts receivable to ensure timely recovery of debts. The study concluded that the companies in tea export review their credit policies to ensure optimal credit is maintained at all times. Tea export firms have credit policies which serve to avoid liquidity risks. The tea export firms utilize credit facilities to adequately finance its operations and they delay accounts payables till the due deadline. So as to utilize the funds in other profitable tasks. The study recommends that the tea export companies set Economic Order Quantity level to enable the firms to only order sufficient inventory at minimal costs. The companies should employ inventory control system for efficient management of inventory and prepare inventory budget is prepared to ensure adequate inventory is available for smooth operations of the firms.
Key Words: Accounts Receivable Period, Payable Deferral, Inventory Conversion Period, Cash Flow Planning
CITATION: Chula, H. B., & Wanjala, M. W. (2023). Liquidity management on financial performance of tea exporting companies in Mombasa, Kenya. The Strategic Journal of Business & Change Management, 10 (2), 1010 – 1027.
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DOI: http://dx.doi.org/10.61426/sjbcm.v10i2.2647
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