Effects of Working Capital Management on Financial Performance of the Manufacturing Firms Listed at Nairobi Securities Exchange

Abstract

Working capital influences decisions organizations make regarding financial economics. This study conceptualized association between working capital management and financial performance. Its primary goal was to evaluate the effects of working capital management on financial performance of manufacturing firms listed at Nairobi Securities Exchange. Information was obtained from secondary data. Descriptive research design was adopted. Published record of nine manufacturing firms for the period of 2012 to 2021 were used to obtain data. Eight firms were used in the analysis due to data availability. Inferential statistics was used to test the hypotheses. According to findings, working capital requirements, cashflow ratios and liquidity ratios collectively and respectively significantly influenced manufacturing firms’ performance. It was deduced that working capital management influenced manufacturing firms’ financial performance. Hence, firms should put more emphasis on working capital management. This study suggested that manufacturing firms ought to have a good working capital management policy since it had significant impact on their performance. This study further recommended that firms must look at each component, that is, working capital requirements, cashflow ratios as well as liquidity ratios since they collectively and respectively impacted on financial performance