Effect Of Working Capital On Financial Performance Of Listed Manufacturing Firms In The Nairobi Securities Exchange

Abstract

The study sought to analyze the effects of working capital on financial performance of listed manufacturing companies in the Nairobi Securities Exchange. The specific research objectives were to analyze the effect of accounts collection period on financial performance of listed manufacturing companies in Nairobi Securities Exchange, to determine the impact of accounts payable period on financial performance of listed manufacturing firms in Nairobi Securities Exchange, to examine the impact of firm size on financial performance of listed manufacturing firms in Nairobi Securities Exchange and to determine the impact of capital structure on financial performance of listed manufacturing firms in Nairobi Securities Exchange. The study adopted a descriptive research design and incorporated a census study for all listed manufacturing firms at NSE Kenya that provided an insight analysis for the variables. The study target population was based on the listed firms in the Nairobi Securities Exchange. The study exclusively relied on secondary data obtained from the selected company’s audited annual financial statements and presented by the Nairobi Securities Exchange’s Handbook. Data analysis of the current study was done via use of descriptive and quantitative techniques. Statistical Package for Social Sciences version 23 was used and the output generated. The result indicated that there was a negative Spearman’s correlation between ROA and accounts collection period r = - .332.Spearman’s Correlation between account payables period and ROA was also negative with r = -0.177. An increase of firm size resulted in an increase of financial performance for the firms, similarly increase in debt to equity ratio also led to increase in financial performance for the firms. It was recommended that the government puts up supportive business infrastructure to facilitate smooth operations of manufacturing firms. The management of these firms should reconsider their working capital management techniques