Effect of Working Capital Management on Financial Sustainability of Non-governmental Organizations With Income Generating Activities in Kenya
Abstract
The study’s objective was to establish the effect of working capital management on
financial sustainability of NGOs with income generating activities in Kenya. The paper
had operating surplus ratio as the dependent variable and average collection period,
current ratio, acid ratio and cash ratio as the independent variables. Descriptive and
cross-sectional design was used and with a populace of 33 NGOs in Kenya while
utilizing Secondary data. Mode of statistical data with the aid of SPSS was Descriptive
statistics and inferential statistics. The study found out that that Average Collection
Period, Current Ratio as well as Acid Ratio and Cash Ratio had a 92.6% impact on the
financial sustainability of NGOs with income generating activities in Kenya depicting
a strong relationship and that working capital management is vital in influencing the
financial sustainability of NGOs with income generating activities in Kenya. The
results also showed that the P value was 0.000. This exhibited that the regression model
was substantial and the model was fit. It was also evident that the financial sustainability
of NGOs with income generating activities depend 0.004 of average collection period.
Importantly, at 95% confidence level, the financial sustainability of NGOs with income
generating activities had a level of significance of less than 0.05 with Average
Collection Period at 0.000 level of significance indicating that it influences Financial
Sustainability. Current Ratio at 0.225>0.05 level of significance, Acid Ratio at
0.447>0.05 level of significance and Cash Ratio at 0.860>0.05 level of significance did
not influence Financial Sustainability of Income generating activities NGOs. This led
to a conclusion that Average Collection period influences Financial Sustainability while
Acid Ratio, Current Ratio and Cash Ratio did not influence Financial Sustainability of
NGOs with income generating activities. Further, the researcher came to a conclusion
that ACP, current ratio and acid ratio have an effect on operating surplus ratio and
recommended that the state ought to implement policies to alleviate the adverse effects
of financial sustainability among NGO’s. Additionally, the outcome prompted a
conclusion that ACP, current ratio, acid ratio and cash ratio have 92.6 % impact on
financial sustainability of NGOs with income generating activities in Kenya meaning
that 7.4% is as a result of other factors hence a recommendation to do more research
involving all factors affecting financial sustainability. Also, the research recommends
that further studies to consider the use of primary data sources to help to give in-depth
information and reliable data in determining the bearing of working capital
management on financial sustainability of NGOs with income generating activities in
Kenya.
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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