CASH FLOW MANAGEMENT ON FINANCIAL PERFORMANCE OF MANUFACTURING AND ALLIED FIRMS LISTED IN NAIROBI SECURITIES EXCHANGE, KENYA
Abstract
The purpose of the study is to investigate the effect of cash flow management on financial performance of manufacturing and allied firms listed in NSE. The study used cross sectional descriptive research design. The study studied all 6 NSE listed manufacturing and allied companies in Kenya. The study targeted senior management of all 6 listed manufacturing firms. Stratified random sampling technique was used to select a sample size of 74 respondents with the help of Slovin’s formula. The study employed both primary data and secondary data drawn from financial statements of the selected manufacturing firms for the period of study. The data was analyzed by descriptive statistics such as, mean and standard deviation. Correlation analysis and multiple linear regression analysis was used to establish the relationship between cash flows management and financial performance of manufacturing firms. Hypothesis testing was performed using t-test and F-test. The t test was used to test the statistical significance of the independent variables while ANOVA F statistic was used to confirm the goodness of fit using level of significance in the regression model. The analyzed data was presented by use of tables. The descriptive results revealed that the business operating cash flow comes from cash receipts for the sale of goods or services and the manufacturing firms receive operating cash flow from cash interest and the firms’ major cash outflow is through taxes, and government fees. The study also established that firm’s net operating cash flow is sufficient and the manufacturing firms collect principal on debt instruments of other entities. The study concluded that the manufacturing and allied firm’s net free cash flow has increased. Also firms use free cash flow to pay dividends and the firms’ net free cash flow is used to settle creditor’s payment in most cases. The study further concluded that the manufacturing and allied firms listed in stock exchange have strong free cash flow. The study recommended that the management of manufacturing firms should management the operating cash flow emanating from cash receipts for the sale of goods or services. This could be achieved by adopting aggressive selling practices so as to maximize sales. Also the manufacturing firms should manage operating cash flow received from cash interest. The management of manufacturing and allied firms should find a mechanism to curb cash outflow which is through taxes and other government fees.
Key Words: Operating Cash Flow, Investing Cash Flow, Financing Cash Flow, Free Cash Flow
CITATION: Mwasingo, J. M., & Ibrahim, A. (2022). Cash flow management on financial performance of manufacturing and allied firms listed in Nairobi Securities Exchange, Kenya. The Strategic Journal of Business & Change Management, 9 (4), 976 – 990.
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DOI: http://dx.doi.org/10.61426/sjbcm.v9i4.2464
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