EFFECT OF WORKING CAPITAL MANAGEMENT ON FINANCIAL PERFORMANCE OF LISTED COMMERCIAL AND SERVICES FIRMS IN KENYA
Abstract
The study established the effect of working capital management on financial performance of the listed firms under the commercial and services sector at Nairobi Securities Exchange. The study specifically, established how average collection period, inventory conversion period, average payment period and cash conversion cycle affects financial performance of listed commercial and services firms in Kenya. This study adopted a descriptive survey research on the 12 commercial and services firms listed at NSE over the period 2008-2017. Descriptive as well as Inferential statistics of correlation and regression analysis were employed to establish the relationships between the variables. The study findings indicated that Accounts Collection Period had a negative and significant effect on financial performance of listed firms in the commercial and services sector in Kenya; Inventory Conversion Period had a negative and significant effect on financial performance of listed firms in the commercial and services sector in Kenya; Accounts Payable Period has a negative but not significant effect on financial performance of listed firms in the commercial and services sector in Kenya and Cash Conversion Cycle had a positive but not significant effect on financial performance of listed firms under the commercial and services sector in Kenya. The study recommended the listed firms in the commercial and services sector as well as other sectors to review their credit management practices so that the time period for repaying is reduced; to come up with effective inventory management practices that would aim to manage inventory holding period and increase conversion period without compromising customer demands; to come up with better debt management policies which aim to have a balance between the repayment period and holding of debts. The debts can be held without compromising the penalties for doing so and to come up with practices and procedures which would increase the rate of converting their inventory into cash some of which is managing credit.
Key Words: Average Collection Period, Inventory Conversion Period, Average Payment Period, Cash Conversion Cycle, Financial Performance, Listed Commercial and Services Firms
CITATION: Nyangweso, I. N., & Wepukhulu, J. M. (2019). Effect of working capital management on financial performance of listed commercial and services firms in Kenya. The Strategic Journal of Business & Change Management, 6 (4), 335 – 346.
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DOI: http://dx.doi.org/10.61426/sjbcm.v6i4.1390
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