INFLUENCE OF INTERNAL AND LEASE FINANCING ON BUSINESS SUSTAINABILITY OF ENTERPRISES IN KENYA: A CASE OF DAVIS & SHIRTLIFF LIMITED
Judy Njeri Kiragu - Master of Business Administration (Strategic Management), Graduate Business School, School of Business, Catholic University of Eastern Africa, Kenya
Dr. Susan Wasike - Catholic University of Eastern Africa, Kenya
ABSTRACT
Enterprises are critical to the sustenance of the Kenyan economy as they are a source of employment for many citizens both the skilled and unskilled workforce. For businesses to maintain their operations, they require finances to meet both the operational and strategic goals. The purpose of the study was to identify the influence of internal and lease financing on sustainability in the long run. The study was guided by four theories namely; pecking order theory, trade off theory, agency theory and the resource based view theory. As a case study, secondary data in the form of the company’s financial statements over a period of five years was used. The records the firm being studied were reviewed to understand how it had ensured it remains sustainable within the period studied. This case study was important because it would assist in the understanding on how financing was a direct underlying driver to effective sustainability of a business or otherwise hence, supporting or disapproving the general applicability of the finance theory. Data was collected and analyzed using MS excel where ratio analyses techniques were used to assist in identifying trends. Correlation coefficients were computed to establish whether there exist a relationship between the variables under study. The findings of the study revealed the firm was financed mainly through retained earnings, then trade credit, leases and finally on debt. The correlation coefficient indicated that each of the sources of finances had a positive correlation with each of the independent variables; revenue and profit. The study stresses that liquidity, leverage and profitability ratios should also be considered while determining the sources and amounts of finance as this would assist in identifying whether financing mix adopted is viable. The study concludes that each of the sources of finance is critical in ensuring a company’s sustainability. The study recommends that future studies should be done to other firms that are yet to be publicly listed from various industries to establish the sources of finances used and how they influence their sustainability.
