Relationship between profitability and working capital of small and medium enterprises in Kenya
The main objective of the study was to establish the relationship between profitability and working capital of Small and Medium Enterprises in Kenya. . Mathuva (2009) examined the influence of working capital components on corporate profitability by using a sample of 30 firms listed in the Nairobi Stock Exchange for the periods between 1993 to 2008. The key studies of his findings were that there exist a highly Significant negative relationship between the time it takes for firms to collect cash from their customers and there exist a highly significant positive relationship between the time it takes the firm to pay its creditors (average payment period) and profitability. The sample of the study consisted of 40 Small and Medium Companies operating in Nairobi Kenya and banking with Bank Of Africa Kenya Limited. The data collection was based on secondary data sources which included audited financial . statements for the year ended 31 st December 2009 and research design was based on regression and descriptive statistics which was run through SPSS and results presented in form of a table. The study considered dependent and independent variables which included profitability (dependent variable) which was measured using EBIT and Cash Conversion Cycle and its components (Independent Variable )The key findings for the study was there is statistical significance between profitability and working capital.