The Effect of Working Capital Management on the Profitability of Agricultural Firms Listed in Nairobi Securities Exchange
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Date
2014-11Author
Luchinga, Lucy M
Type
en_USLanguage
enMetadata
Show full item recordAbstract
Working Capital Management involves management of current assets and liabilities
of an institution. Proper management is critical in order for a firm to improve on its
productivity. The main objective of the study was to establish the effect of working
capital management and financial performance of agricultural firms listed in NSE.
The research used both descriptive and quantitative research design. The population
for the study constituted all agricultural companies quoted at the NSE for the period
of four years from 2009 to 2012 which are seven in number. The quantitative research
approach was used. The study found out that inventory turnover in days has negative
relationship with Return on Assets from the regression model, which means that
companies ‘financial performance can be increased by reducing inventory in days.
Cash Conversion period and Net payment period shows significant negative relation
with Return on Equities showing that firms ‘financial performance can be increased
with reducing the number of days in both of them. The study therefore recommends
that there should be a proper trade-off between profitability and risk. The profitability
of agricultural firms listed in the NSE is dependent on great working capital
management. The study recommends that managers of these firms should work on
reducing their cash conversion cycles, negotiate for better payment terms with
suppliers and collect receivables as soon as possible from their clients in order to be
more profitable.
Publisher
University of Nairobi