EFFECTS OF WORKING CAPITAL MANAGEMENT ON FINANCIAL PERFORMANCE OF PRIVATE MEDICAL FACILITIES IN MOMBASA COUNTY

JOSPHINE AYUMA KOMBO

Abstract


The objective of the study was to assess the effects of working capital on financial performance of private medical facilities in Mombasa County. The study specific objectives were to analyze the impact of cash conversion cycle on financial performance of private medical facilities, to assess the impact of accounts receivables on financial performance of private medical facilities, to analyze the impact of accounts payable on financial performance of private medical facilities and to examine the impact of accounts accruals on financial performance of private medical facilities. The financial performance of many business entity is pegged on efficient management of its current resources, given that the core business activities of a firm operations is impacted by management plan and decisions on trade off for the company working capital elements. These categorically consist of inventory, accounts payable, accounts receivables, cash conversion cycle and accounts accrual. Relevant working capital management theories that relate to aspect of working capital were used. These included theory of Keynesian liquidity preference, Cash Conversion Cycle Theory, pecking order theory, Free Cash Flow Theory and theory of credit. Mombasa County had a registered number of 148 private medical facilities as per the county government report of 2017. The study sample size were 37 respondents from private medical facilities in Mombasa County, this was a represented 25% of the target population. The study adopted a descriptive research design, data was analyzed using SPSS to yield analysis of demographic data. From the analysis, a response rate of 86% was attained. The regression equation showed a strong relationship between financial performance to accounts accrual and accounts receivables while accounts payable and cash conversion cycle had a negative significance relationship. 

Key terms: Account Payable, Account receivable, Bad debts, Cash management, Financial Performance, Inventory management, Liquidity, Medium Enterprise, Profitability, Working capital


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