The relationship between working capital management policies and financial performance of oil marketing firms in Kenya
This was study on the relationship between working capital management policies and financial performance of oil marketing firms in Kenya. The study was inspired by the fact that working capital in any firm is extremely critical and requires conscious balance between the components on the working capital namely cash, receivables, payables and inventory. The objectives of the study were to establish the working capital management policies among oil marketing firms in Kenya and to examine the relationship between working capital management and profitability in oil marketing firms in Kenya. The study highlighted what other studies found out on the three common working capital management policies namely aggressive, conservative and moderate policies. The research design was causal research trying to establish the relationship between policies applied with the profit~bility of the oil marketing firms. The design came up with a regression model with the dependent variable being the net operating income with independent variables including Average collection period, inventory turnover period, average payment period, current ratio, debt ratio and natural logarithm of sales.The population for the study focused on the oil marketing firms who are members of Petroleum Institute of East Africa, analyzing financial statements for the 4 years from the year 2006 to 2009. The analysis includes statistics like mean, correlation, regression analysis, ANOVA and coefficients statistics. Analysis of the questionnaire was done and the findings represented in tables, graphs and pie charts. The study found out that the identified independent variables affect the performance by 56.7%, and that the oil marketers reviewed apply aggressive working capital policy.