EFFECTS OF WORKING CAPITAL MANAGEMENT PRACTICES ON FINANCIAL PERFORMANCE OF EDIBLE OIL PRODUCING COMPANIES IN KENYA GEORGE NYABOGA ONSONGO

Abstract

The purpose of the study was to analyze the effects of working capital management practices on financial performance of edible oil producing companies in Kenya. The study adopted descriptive research design and with a target population of 62 respondents were selected from accounts department, finance department and operations department. Specific research objectives focused on determining the effects of accounts receivable collection on financial performance of edible oil producing companies in Kenya, assessing the effects of inventory turnover on financial performance of edible oil producing companies in Kenya, examining the effect of accounts payable management on financial performance of edible oil producing companies in Kenya and assessing the impact of cash ratio on the performance of edible oil producing companies in Kenya. Primary data was collected through the use of questionnaires. Data was analyzed using both descriptive and quantitative statistics and multiple linear regression analysis model. The output of the analysis was presented using a statistical summary applied by use of graphs, charts, tables, percentages and multilinear regression while secondary data was obtained from content analysis. Data analysis was done by use of advanced statistical software IBS SPSS version 20 to yield ANOVA. The study findings indicated that working capital management practices and financial performance of edible oil producing companies in Kenya depends on the appropriate and effective accounts receivable collection, inventory turnover, accounts payable management and cash ratio that is in place in the organizations. The study involved an in-depth analysis and outlined correlation between the independent and dependent variables of the study. The independent variables had a positive and significance relationship to the dependent variables. From the analysis there was a positive and significant relationship between financial performance and Accounts Receivable (r=0.230, p value <0.05). Secondly, there was a positive and significant relationship between financial performance and Inventory Turnover (r= 0.410, p value < 0.05). Thirdly, there was a positive and significant relationship between financial performance and Cash Ratio (r= 0.027, p value < 0.05). Lastly there was a positive and significant relationship between financial performance and Accounts payable (r= 0.297, p value < 0.05). The study concludes that inventory turnover and accounts payable should be given a higher priority in the organizations. 

Key Terms: Account Payable, Account receivable, Cash management, Financial Performance, Inventory management, Medium Enterprise, Profitability