| dc.description.abstract | The aim of the study is to assess the relationship between working capital components and profitability of small and micro enterprises in Kisumu City. Most researchers have confined their research on working capital management and practices and how they affect profitability of companies and value. However, careful analysis on the impact of each of the component of working capital and how each affect the profitability of firms is important hence the need to for the study. The study focused on small and micro enterprises and targeted 217 firms in Kisumu City .Out of the targeted population of 217, 198 respondents responded successfully.
The respondents consisted of 156 sole proprietors, 35 were partnership and 7 were private companies. The study revealed that most small and micro enterprises experience problem of little working capital, difficulty of managing working capital and rising cost of business stock. It also showed that most of the owners over depend on business for personal needs and bad debts is a major contributor to their poor performance.
The study assessed the impact of each of the working capital components which included inventory, receivables, payables accounts and cash. The data collected was analyzed using descriptive and inferential techniques and the results revealed that cash management is the most important component of working capital. The ranking in order of importance showed that cash is the most important, followed by debt collection management, inventory and last was accounts payables.
The study concluded that there is a significant negative relationship between working. capital components with the profit. The study recommends that SMEs in Kisumu City should undertake courses in business record keeping, set clear credit policies in order to help them minimize bad debts and train on inventory management in order to improve their business performance. | en_US |
