| dc.description.abstract | Working capital management (WCM) refers to the management of current assets and
current liabilities. Management and evaluation of WC is aimed at ensuring that the
firms’ current assets and Current liabilities are employed in an optimal way to achieve
the goal of profit maximization. By doing this, managers need to ensure that a firm is
able to continue its operations and has sufficient ability to satisfy both maturing shortterm
debt and future operational expenses. This study sought to establish the
relationship between working capital management and financial performance of retail
supermarkets in Nairobi County, Kenya. The study adopted a descriptive survey
design.. Data for eight large supermarkets was gathered over a five year period
between 2010 and 2014. This period was considered by the researcher to be adequate
to establish the existence of any relationship. Secondary data collected from annual
audited financial statements of the firms was used for this study. This consisted of
data from the income statement and statement of financial position of the companies
which was used to compute Return on assets, Days of sales outstanding, Days of sales
in inventory, Days of payables outstanding, leverage and size of the firm. Pearson
correlation analysis and regression analysis were performed on the variables. The
results indicate that DSI had a positive and insignificant relationship with ROA (β =
0.060; p =0.278> 0.05). Further, t-test indicated that DSO had a positive and
insignificant relationship with ROA (β = 0.056; p=0.348> 0.05). Regression results
further indicated that DPO had a moderate negative significant relationship with ROA
(β = -0.071; p=0.061> 0.05). Size of the firm had a strong significant relationship on
ROA (β = -0.588; p=0.004<0.05). Management of working capital through increasing
DPO without hurting the credit standing has an effect on the financial performance
and the value of a firm. The current study results indicate that a longer DPO would
lead to higher ROA. Leverage according to study results had an insignificant negative
influence on ROA (β = -2.115; t = -0.249; p < 0.05). This indicated that increase in
leverage would not have a major impact on ROA for the surveyed supermarkets.The
study recommends that retail firms in the Kenyan market should effectively manage
their working capital to ensure maximum returns because other forms of financing
have limitation | en_US |
