Effect Of Working Capital Management On The Financial Performance Of The Companies Listed At The Nairobi Securities Exchange

Abstract

Working capital management is key to prosperity of any business organizations. Business firms in all sectors are prone to high degree of external business environment and industry structures change. The main objective of this paper was to determine the impact of working capital management on the financial performance of the firms quoted under the Nairobi Securities Exchange. This paper employed descriptive study design with the targeted population constituting 65companies quoted under the Nairobi Securities Exchange. However, the paper only covered 20 of the targeted firms quoted under the NSE. Data was analyzed on the basis of the mean and the F test statistic was computed at 5% significance level and Analysis of Variance (ANOVA). From the regression analysis, the study confirmed that four independent variables that were studied which included leverage, inventory turnover ratio, firm size and liquidity explain 11.5%of the variability with the financial performance as represented by adjusted R2. The study therefore concluded that working capital management affects the financial performance of the companies quoted at the Nairobi securities exchange. The study recommends the meeting of the short term obligations whenever they are due, this guarantees trust from the creditors which translates to improved financial performance.