CREDIT TERMS AND FINANCIAL PERFORMANCE OF SELECTED CEMENT MANUFACTURING COMPANIES IN KENYA
Gershon Mwongela Mwau - Postgraduate Student, Department of Accounting & Finance, School of Business, Economics and Tourism, Kenyatta University, Kenya
Dr. Charity Njoka - Lecturer, Department of Accounting & Finance, School of Business, Economics and Tourism, Kenyatta University, Kenya
Gerald Atheru - Lecturer, Department of Accounting & Finance, School of Business, Economics and Tourism, Kenyatta University, Kenya
ABSTRACT
The manufacturing sector is essential to a nation's economy as it underpins industrial advancement and sustainable economic growth. In the highly competitive manufacturing sector, particularly within capital-intensive industries such as cement production, effective credit management is crucial for ensuring liquidity, profitability, and overall financial stability. To increase sales, the cement companies have employed a number of credit management practices to increase their market share and ensure a competitive edge. Regrettably, some of these practices have led to a depressed financial performance as the companies fight to remain afloat. These practices pose an enormous obstacle to the industry, impacting its growth rate and, subsequently, its contribution to Kenya's economy. This research therefore examined the credit terms influence their financial performance. The study used an explanatory research approach and was based on Agency Theory. All Kenyan cement producing firms, including Bamburi Cement Ltd., MCL, East Africa Portland Cement Company, Savannah Cement Ltd., and ARM, were included in the target demographic. All thirty participants—10 credit officers, ten finance officers, five accountants, and five heads of credit departments—were surveyed in order to collect data. Both primary and secondary sources of data were utilized. Primary information was obtained through structured questionnaires administered to respondents, while secondary data was drawn from published financial statements, particularly focusing on ROA. Prior to analysis, diagnostic tests such as normality, homoscedasticity, and multicollinearity were conducted. The data was then processed using descriptive and inferential statistical techniques. Ethical protocols were observed by ensuring participants were fully briefed on the study’s purpose, obtaining their consent, and maintaining anonymity in responses. Hypothesis testing through regression analysis revealed that credit terms affected the financial performance of the cement manufacturing companies in Kenya. The study concluded that robust credit management practices collectively contribute to improved financial performance among cement manufacturers in Kenya.