The Relationship between Working Capital Management Policy and Financial Performance of Companies Quoted at Nairobi Securities Exchange, Kenya
International Journal of Economics, Finance and Management Sciences
Volume 2, Issue 3, June 2014, Pages: 212-219
Received: May 9, 2014; Accepted: May 29, 2014; Published: May 30, 2014
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Authors
Winnie Mokeira Nyabuti, School of Human Resource Development, Jomo Kenyatta University of Agriculture and Technology, Nairobi, Kenya
Ondiek Benedict Alala, School of Accounting and Finance, University of Kabianga, Kericho, Kenya
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Abstract
Working capital management and profitability relationship has been explored by many researchers. The study’s research objectives include: To find out the relationship between working capital management policy and financial performance of companies quoted at NSE, to find out if efficient Aggressive Investment Policy has any effect on the ROA of companies quoted at NSE, to establish if Aggressive Financing Policy influences ROA of the firm at NSE, to establish the influence of working capital management policy on financial performance. The population of the study includes ten companies listed at the NSE for five years from 2008 to 2012. From the Nairobi Securities Exchange hand book (2012) sixty two firms are listed, drawn from the agriculture sector, Commercial and services, Financial and Investments, Industrial and allied Sector, Alternative Investment Market Segment. Firms quoted at NSE are preferred due to the availability and reliability of the financial statements in that they are subject to mandatory audits by recognised audit firms. The study utilised secondary data obtained from the published financial statements which were readily available at the NSE and the CMA libraries. The data collected included information on assets, liabilities and revenue levels for the period 2008 to 2012, using the annual reports published by the above mentioned companies which have been listed by NSE. Further the data was obtained from the annual handbook published by NSE.The study concludes that there is an existing relationship between working capital management policy and financial performance of companies quoted at NSE. The dependent variable which was ROA is influenced by the independent variables which are AIP and AFP by 17.2%. This means that 17.2% of the changes in depended variable (ROA) can be explained by explanatory variables while 82.8% cannot be explained by explanatory variables hence error term.
Keywords
Working Capital Management Policy, Financial Performance, Aggressive Financing Policy, Aggressive Investment Policy and Return on Assets
To cite this article
Winnie Mokeira Nyabuti, Ondiek Benedict Alala, The Relationship between Working Capital Management Policy and Financial Performance of Companies Quoted at Nairobi Securities Exchange, Kenya, International Journal of Economics, Finance and Management Sciences. Vol. 2, No. 3, 2014, pp. 212-219. doi: 10.11648/j.ijefm.20140203.12
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