INTERNAL FINANCIAL FACTORS AND THE FINANCIAL PERFORMANCE OF EXPORT PROCESSING ZONE FIRMS IN MOMBASA COUNTY, KENYA
Abstract
The study sought to evaluate the effect of internal financial factors on the financial performance of Export Processing Zones in Mombasa County. The study was guided by Tobin’s Q theory, resource-based theory and liquidity theory. The study utilized structured questionnaires as tools for data collection with a total number of twenty-four EPZs visited by the researcher who targeted finance officers, risk management officers and chief executives. The sample size of the study comprised of 60 respondents. Data analysis was done by use of Statistical Package for Social Science (version 25). From the findings it was established that inventory turnover rate is high in most of the EPZ firms. This implied that the EPZ firms’ stock is converted into ready goods quickly. The study showed that the accounts payable are settled late in the period stipulated by the individual EPZ firm. This meant that all payments due to other parties were delayed until the end of the agreed repayment time and also in the case of accounts receivable, they are pursued early by the firm before the stipulated time. The study established that the EPZ firms’ capital structure follows the policies set by the organization and that the cash flows of the EPZ firms were sufficient to support firm operations and EPZ firms have high leverage ratio to support their day to day operations. The study concluded that in liquidity has a significant positive effect EPZ firm’s financial performance. On capital adequacy, the study concluded that there is a significant positive effect on financial performance of EPZ firms. On budgeting, it was concluded that budgeting has a positive significant effect on EPZ firm’s financial performance. The study concluded that asset quality has a positive significant effect on financial performance of EPZ firms. The study recommends that firms should improve inventory turnover rate so as to improve its overall financial performance. The firms should always settle accounts payable late in the period stipulated by the firms so as to commit the funds to income generating activities. The firms should draw a dynamic working capital management policy to ensure tight control of firms’ liquidity to enable smooth flow of operations. The study results would be useful to EPZ firms which face challenges of financial performance. The study findings may assist the management of manufacturing firms by contributing knowledge and experiences regarding the effect of internal financial factors in improving financial performance of the firm.
Key Words: Liquidity, Capital Adequacy, Budgeting, Asset Quality, Financial Performance
CITATION: Mbogo, E. K., & Kariuki, G. M. (2020). Internal financial factors and the financial performance of export processing zone firms in Mombasa County, Kenya. The Strategic Journal of Business & Change Management, 7(4), 591 – 606.
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DOI: http://dx.doi.org/10.61426/sjbcm.v7i4.1810
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