Effect of Cash Flow on the Financial Sustainability of Nongovernmental Organizations in Nairobi County

Abstract

The fast-paced commercialization, trending changes and continuous improvement at alarming speed is clarion call systematic and extensive management of cash flows. The global economic progression relies on the cash flow to operate to its optimum. Consequently, the cash flow is a crucial indicator of operational business. Many firms have recorded their profitability nature in financial statements yet facing great financial distress. The researcher was keen on investigating the effects of cash flow on the financial sustainability of non-governmental organizations with 46 NGOS sampled NGOs from Nairobi County. Subsequently, the cash flow is integral for the firm's stability. It unlocks immense avenues for productivity and continuous improvement. Cash flow is the bedrock for business stability which triggers financial sustainability in the long run. Additionally, the secondary data was gathered to enhance conclusive findings relating to Cash flow, firm size, board independence and board structure. In addition, descriptive technique was useful for the successful testing of hypotheses thereby leading to credible and accurate results. The 46 NGOs are selected by picking every 25th NGO from the 1143 NGOs in Nairobi County. Furthermore, the data collected was subjected to intensive scrutiny, classification, review, coding and cleaning. The procedure was paramount in ensuring that the data is free from error, complete and accurate before analysis via SPSS. Correlation of variables and the R squares. R which is 0.686, shows that there is 68.6% correlation among the variables in this study. The correlation coefficient is 0.471. It implies that 47.1% change in financial sustainability is caused by Board structure, Firm size, Board independence and Cash flow. The remaining 52.9% change in dependent variable are caused by factors not prioritized and captured in this examination. As a consequence, ANOVA test was essential in giving interpretation that postulates if the model is statistically significant for modelling or not. The F statistics is 50.137 with significance of 0.000 which is less than the p-value of 0.05. The outcome blueprinted that whenever all factors are held unchanged, financial sustainability has a positive effect of 2.0% hence an increment of 2.0% (β0=0.20). From empirical viewpoint, a change in cash flow by a singular unit is replicated on the same directional change of financial sustainability by 0.214 if all factors are maintained unchanged (β=0.214, p=0.000<0.05). Moreover, an addition of a single unit of firm size triggers insignificant decrement in financial sustainability by 0.046 whenever other variables are held constant (β=-0.046, p=0.088>0.05). Nonetheless, the advancement in one unit of board independence translated to insignificant improvement on the financial sustainability by 0.197 if other factors are kept unchanged (β=0.197, p=0.238>0.05). Finally, a change in the board structure by an additional one unit registered a substantial positive deviation in the financial sustainability of 1.490 (β=1.490, p=0.000<0.05). The research study recommends a future research study on effects of politics or macroeconomic variables on the financial sustainability of NGOs in the country using primary and secondary dataset.