WORKING CAPITAL MANAGEMENT ON FINANCIAL PERFORMANCE OF FOUR-STAR RATED BEACH HOTELS IN MOMBASA, KENYA
Abstract
This study was to investigate the effect of working capital management on financial performance of five-star rated hotels in Mombasa. The study adopted cross-sectional descriptive survey research design. The target population of the study was management and supervisory staff of five-star beach hotels in Mombasa County which include; Sarova Whitesands Beach Resort, Serena Beach Resort, Bahari Beach Hotel, Pride Inn Flamingo Beach Hotel and Nyali International Beach Resort. The population was drawn from the departments of Operations, Finance and Credit. The study utilized purposive sampling design and a sample of 57 respondents was selected by use of Slovins statistical formula. The study utilized primary data collected by use of structured closed-ended questionnaires. On data analysis, descriptive statistics and inferential statistics was employed to analyze collected data. Statistical Package for Social Science (SPSS) was the data analysis tool. The study results revealed that the five-star hotel has account receivable payment policy. This policy assists in planning for accounts receivable prudently. Further, it is shown that the beach hotel it takes less than a month to collect accounts receivable. Also there is maintenance of account receivable records and reconciliation in the five-star rated hotel and that the beach hotel sets credit limits to its customers. The study concludes that the beach hotels draw their funding from equity and external borrowing. Further, it was concluded that the beach hotels have adequate total asset reserves to cover its financial needs and this means that the beach hotel capital base will be affected by loss of income-generating activities. This fact has led triggered beach hotels to diversify capital portfolio. The study recommended that the management of beach hotels should widen their capital by focusing on the financing avenues in addition to equity and external borrowing. It is recommended that the beach hotels should ensure adequacy of total asset reserves to cover its financial needs and should cushion itself from loss of income-generating activities. The study recommended that the management of the beach hotels should ensure that goods are purchased when need arises. Further the management of the hotels should develop a re-order level policy which is dynamic. Also the beach hotels should adopt sales forecast approach when placing hotel order from the suppliers and they should purchase goods in large quantities to enjoy trade discount.
Key Words: Receivable Cycle, Payment Deferral Period, Inventory Conversion Cycle, Cash Conversion Cycle
CITATION: Twaha, N., & Ibrahim, A. (2022). Working capital management on financial performance of four-star rated beach hotels in Mombasa, Kenya. The Strategic Journal of Business & Change Management, 9 (4), 139 - 154.
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DOI: http://dx.doi.org/10.61426/sjbcm.v9i4.2399
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