Relationship between working capital management financing policy and profitability: A survey of manufacturing firms in Kenya. Caffaso Unni agnes
Abstract
Working capital management (WCM) is of a particular importance to manufacturing
firms at NSE .Corporate finance literature has traditionally focused on the study of long
term financial decisions. However, short term assets and liabilities are important
components of total assets and needs to be carefully analyzed. Management of these short
term assets and liabilities warrants a careful investigation since the working capital
management plays an important role for the firms’ profitability. The optimal level of
working capital is determined to a large extent by the methods adopted for the
management of current assets and liabilities. The objective of this research study was to
establish whether there is a relationship between working capital management financing
policies and profitability of manufacturing firms in Kenya.
The population of interest for the study was all manufacturing firms in Kenya. There are
600 registered manufacturing firms as at 31st Dec 2010.Convinient sampling technique
was used. Secondary data for the research was extracted from the audited financial
statement of the companies sampled. A descriptive statistics analysis was conducted on
all the variables to give the general behavior of the manufacturing firms quoted at the
Nairobi Stock Exchange with respect to working capital financing policy and ROA.
Pearson correlation coefficient analysis was also conducted to establish the relationship
among the variables. The relationship between the dependent variable, ROA and the
other variables was conducted using a general regression model.
To establish whether level of the aggressiveness/conservativeness had any significant
relationship a regression model was conducted separately between the dependent variable
and the independent variables alongside the control variables for each of the group. From
the Pearson correlation coefficient analysis, the results showed some aspects of
relationship among the variables. There was negative relationship between ROA and
financing working capital policy. The regression models indicated that there was some
relationship between financing working capital policy and the firm’s ROA.
Citation
MBA Thesis 2011Sponsorhip
University of NairobiPublisher
School of Business, University of Nairobi
Description
Master Thesis