Browsing by Author "Abdikarim Musa Abdiaziz"

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    Working Capital Management Practices and Financial Performance of Small and Medium Enterprises in Garissa County, Kenya
    (Kenyatta University, 2025-08) Abdikarim Musa Abdiaziz
    Small and medium-sized enterprises (SMEs) are widely recognized as key drivers of economic growth, employment creation, and poverty reduction. Despite this significance, many SMEs in Kenya face persistent financial challenges that undermine their sustainability. In Garissa County, weak financial performance has been linked to inefficiencies in working capital management, a critical area encompassing cash management, inventory management, accounts receivable management, and accounts payable management. Guided by the Financial Advantage Theory, Cash Conversion Cycle Theory, Transaction Cost Theory, and Stakeholder Theory, this study sought to examine the effect of these working capital components on the financial performance of SMEs. The study adopted a descriptive research design, targeting a population of 1,009 SMEs registered in Garissa County. Using stratified random sampling, a representative sample of 278 SMEs was selected, and data were collected through structured questionnaires. The instrument’s reliability was confirmed through Cronbach’s Alpha values above 0.7, while validity was assured through expert review. Ethical considerations were strictly observed, including securing authorization from NACOSTI and Kenyatta University, ensuring informed consent of participants, confidentiality of responses, and appropriate acknowledgement of all secondary data sources. Both descriptive and inferential analyses were undertaken. Descriptive statistics (means, frequencies, and standard deviations) provided an overview of working capital practices, while inferential analysis employed multiple regression to test hypotheses. Diagnostic tests—including the Shapiro-Wilk test for normality, Variance Inflation Factor (VIF) for multicollinearity, and the Durbin-Watson statistic for autocorrelation—confirmed that the data met the assumptions of classical regression. The results showed that the four working capital components collectively explained 61.6% of the variation in SME financial performance (R² = 0.616; F = 87.472, p < 0.05). Inventory management emerged as the strongest predictor (β = 1.279, p < 0.05), followed by cash management (β = 0.226, p < 0.05). Conversely, accounts receivable management showed a significant negative effect in the multiple regression model (β = –0.649, p < 0.05), suggesting that poor debt collection practices and weak credit enforcement erode liquidity. Accounts payable management had a positive but statistically insignificant influence (β = 0.043, p > 0.05). The study concludes that working capital management—particularly inventory and cash management—is decisive for SME profitability, while inefficiencies in receivables and payables remain key vulnerabilities. It recommends that SME managers adopt structured budgeting, robust stock control systems, and effective debt recovery frameworks, while policymakers should strengthen SME financial literacy and provide enabling financing mechanisms. The study contributes both theoretically and practically by affirming the relevance of working capital theories