Effects of Working Capital Management On Profitability of Manufacturing Firms Listed in Nairobi Securities Exchange, Kenya

Abstract

This study examined effect of working capital management on profitability containing twenty manufacturing firms listed in Nairobi securities exchange. Kenya's manufacturing sector has been hit by poor working capital management leading to unstable profits. Despite various scholars conducting studies concerning Kenyan manufacturing firms’ working capital, lack of consistence revenues require further examination on what causes these deviations. Current study was piloted by following specific objectives; Influence of inventories, receivable, payable, and cash managements on profitability of manufacturing firms. Theories that guided this study were: agency, transaction cost, and cash conversion cycle. Descriptive statistics was used on analysis especially, minimum, maximum, mean and standard deviation. Mathematical data evaluation involved inferential statistics. In addition, study model quantitative data was presented in tables. The study accepted census sampling method for collecting secondary data from population of 20 companies listed for five years from 2016 to 2020. Secondary details were found in financial statements of manufacturing firms and Nairobi Securities Exchange. Data was collected using checklist. The study recommended that manufacturing companies should estimate desirable quantity of working capital and concluded that increased working capital should match increased expenses, sales and revenue.