The Effects of Working Capital Management on the Profitability of Pharmaceutical Manufacturing Companies in Kenya
Abstract
Despite the extensive studies on manufacturing firms in Kenya, there has not been
conclusive research on effects of WCM on the profitability of pharmaceutical
manufacturing firms in particular. The research sought to assess how profitability for the
23 pharmaceutical manufacturing companies in Kenya was affected by working capital
management components based on a descriptive research design. The audited financial
statements from the sampled firms for the periods 2016-2020 were the source of data.
Multivariate regression was used for analysis. From the regression analysis, the average
payment period showed a positive effect on profitability. It therefore concludes that
average payment period has a positive effect on the profitability of pharmaceutical firms
in Kenya. An insignificant increase in cash conversion cycle was found on profitability.
The research concluded that cash conversion cycle has no significant effect on
profitability of pharmaceutical manufacturers in Kenya. The research discovered that
inventory turnover days had a negative but insignificant effect on profitability of
pharmaceutical firms in Kenya. The company size was found to have a significantly
positive coefficient with profitability; hence, size depicts a positive effect on profitability
of pharmaceutical firms in Kenya. Debt to asset ratio (leverage) was ascertained to have a
positive and insignificant effect on profitability. Hence, leverage has no significant effect
on profitability of pharmaceutical manufacturers in Kenya. The research suggests that
pharmaceutical manufacturers in Kenya should assess working capital components and
ensure that they get optimal levels whilst focusing on their growth strategies to improve
financial performance
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
- School of Business [1411]
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