Effect of Working Capital Management Practices on the Operational Efficiency of Manufacturing and Allied Companies Listed at the Nairobi Securities Exchange

Abstract

Managing the liquidity of an organization is imperative for all businesses; large, small or medium. If an organization fails to manage its liquidity appropriately, there is bound to be cash shortages. As a result, the organization experience issues in settling its debts. The studies done so far on working capital management proffer no evidence regarding the impact of WCM on efficiency of Kenyan manufacturing and allied firms. The research used both quantitative and descriptive research design. Descriptive research proffers information about features of phenomena or a population. On the other hand, descriptive research design is utilized as a precursor to quantitative research design. Stata and Ms. Excel were used for analysis in this study. Quantitative research approach was used to arrive at the finding of the research. Regression and correlation analysis was used in this study to establish the nature as well as the extent of alliance and to identify the effect of working capital management variables on efficiency measures. The study found that inventory turnover period had a positive non- statistically significant effect on financial performance of this firm. This leads to the conclusion that financial performance of manufacturing and construction is not influenced by the inventory turnover period. This is consistent with literature. The study found that average payment period had a positive but insignificant effect on operational efficiency of manufacturing and allied firms listed at the NSE. Consistent with some studies, the study concludes that the financial performance of is not influenced by the average payment period. The study also revealed that average collection period had a positive but insignificant effect on financial performance. This leads to the conclusion that average collection period does not affect the operational efficiency.