EFFECT OF WORKING CAPITAL MANAGEMENT PRACTICES ON FINANCIAL PERFORMANCE OF LISTED AGRICULTURAL FIRMS IN NAIROBI SECURITIES EXCHANGE. A MODERATING ROLE OF GOVERNMENT POLICIES
EFFECT OF WORKING CAPITAL MANAGEMENT PRACTICES ON FINANCIAL PERFORMANCE OF LISTED AGRICULTURAL FIRMS IN NAIROBI SECURITIES EXCHANGE. A MODERATING ROLE OF GOVERNMENT POLICIES
Rael Bosibori Nyantika - School of Business and Economics, Department of Accounting and Finance, Kenya
Dr. Andrew Nyangau (PhD) - School of Business and Economics, Department of Accounting and Finance, Kenya
Dr. Mactosh Onwong’a (PhD) - School of Business and Economics, Department of Accounting and Finance, Kenya
ABSTRACT
Working capital is a financial matrix that represents operating liquidity available to a business and has direct relationship with the performance and cash of a firms for a period not exceeding one year it’s also referred as net working capital which simplifies the difference between company’s current assets and liabilities in a short term period relating to the next one year period which is reversible. Financial performance of the Agricultural sector in 2018 was 6.1% where as in 2019 was 3.6%. This represented a decline in financial performance by 2.5%. The decrease in performance was associated with inefficient application of working capital management practices. The main objective was to examine the effect of account receivable management on financial performance of listed agricultural firm in Nairobi securities exchange. It was supported by operating cycle theory, transaction costs theory, agency theory and transaction cost economics theory. The study adopted descriptive research design. The target population of the study was 505 comprising of top management, accounting and finance department and procurements department of the listed agricultural firms at 31st Dec 2020 in NSE. The sample size for this study was 319 respondents selected through stratified random sampling. Primary data was obtained by closed questionnaires while secondary data was collected using a data collection sheet. Collected data was analyzed through descriptive (mean and minimum, maximum and standard deviation), and inferential statistics (correlation analysis and regression analysis). The study established that, accounts receivables had a strong but negatively correlated relationship with financial performance of listed agricultural firms in Kenya r=-.450(**), p=.000<0.01. The study concluded that, cash conversion cycles controls the ability of firms to spend outside their budget. Further, the study recommended that listed agricultural firms should have in place modern and technologically advanced inventory management systems. This system would be able increase efficiency and effectiveness reduces turnaround time and improves financial performance.
