WORKING CAPITAL MANAGEMENT AND PROFITABILITY OF TEA PROCESSING FIRMS IN ABERDARE RANGES REGION, KENYA
Abstract
This research determined the effect of working capital management on profitability of tea processing firms in the Aberdare Ranges region of Kenya. The empirical investigation was anchored on the liquidity preference theory, the operational cycle theory, and the theory of profitability-liquidity trade-off. This study adopted a descriptive survey approach and target tea processing factories in the Aberdare ranges region of Kenya under the Kenya Tea Development Authority management. The study adopted purposive sampling to target unit managers, procurement managers, and finance managers as the chosen respondents as they possess the necessary data for the study. A census approach was adopted as the sampling design focusing on all 21 tea processing firms in Aberdare ranges region in the study. The study utilized both primary and secondary data that was collected by use of questionnaires and data collection sheets, respectively. The study considered a five-year span from 2017-2021. Multiple linear regression analysis, correlation analysis, and descriptive analysis were used to analyse data. The results were displayed as graphs, charts, and tables. The study found that cash management had a positive and significant effect on the profitability of tea processing firms in the Aberdares region of Kenya. In addition, inventory management had a significant and positive effect on the profitability of tea processing firms in the Aberdares region. The findings also indicated that debt management had a positive and effect on the profitability of tea processing firms in Aberdares region of Kenya. Further, the study established that credit management had a positive and significant effect on the profitability of the tea processing firms in Aberdares region of Kenya. The study recommends that the management of tea processing firms should make use of cash budgeting, review of target cash balance and preparation of cash flow statements to improve the profitability of their firms. In addition, tea processing firms should make use of effective and efficient order management as a strategy for inventory management so as to improve profitability. By implementing effective order management strategies, businesses can optimize inventory levels, minimize stock outs, and improve customer satisfaction.
Key Words: Cash Management, Inventory Administration, Debt Management, Credit Administration
CITATION: Wanyoike, D. N., & Omagwa, J. (2024). Working capital management and profitability of tea processing firms in Aberdare Ranges Region, Kenya. The Strategic Journal of Business & Change Management, 11 (2), 477 – 497. http://dx.doi.org/10.61426/sjbcm.v11i2.2925
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DOI: http://dx.doi.org/10.61426/sjbcm.v11i2.2925
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