Effects of working capital centralization on the cash flows of listed manufacturing companies in Kenya

Abstract

The objective of the study was to establish the effect of centralization of working capital management on the cash flows of quoted manufacturing companies in Kenya. Secondary data was collected from published financial statements of 7 quoted manufacturing companies for a period of 5 years between 2010 and 2014. Data was analyzed using Microsoft Excel 2013 data analysis tool. Regression and correlation analysis was used to determine the nature and strength of the relationship between independent and dependent variables. The study findings reveal that centralization of working capital is very significant in determining the cash flows of manufacturing companies in Kenya. This can be supported by the 27.4% variance of cash flow that is explained by centralization of working capital management. On the other hand lack of centralization of working capital leads half variance in cash flows as indicated by 12.2% that is explained by the net inventory; net accounts receivable; net accounts payable and net short-term loans.