Cash Budgeting Practices and Profitability of Small and Medium-Sized Enterprises in Nyeri Town Sub-County, Kenya
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Date
2020
Authors
Kamau, James Mungai
Mungai, John Njangiru
Journal Title
Journal ISSN
Volume Title
Publisher
International Academic Journals
Abstract
The study sought to establish the effect of
cash budgeting practices on profitability of
Small and Medium-sized Enterprises in
Nyeri County, Kenya. Profitability was
measured using the Return on Assets
(ROA). The study used systematic sampling
to determine the different SMEs whose
employees and officials would be adopted as
sample members. In this study, the
researcher used 311 respondents as sample
members with 100 of them being the
officials mostly from management.
Questionnaires were used in collecting
primary data. The instrument was tested for
reliability using Cronbach’s Alpha
Reliability test while content validity was
assessed using expert opinion. The
researcher used Statistical Package for
Social Sciences (SPSS) to conduct data
analysis. The study used both descriptive
and inferential statistics in data analysis.
Further, diagnostic tests were conducted to
check whether the data set met general
assumptions for certain statistical procedures
such as regression analysis. The diagnostic
tests included; normality tests, multi
collinearity test, and heteroscedasticity test.
Data was analysed using descriptive and
inferential analysis. Descriptive statistics
included means and standard deviations. The
inferential statistics included the regression
analysis and Pearson correlation analysis. As
indicated by R square, the Coefficient of
Determination, 78.49 percent of variation or
changes in profitability was explained by
variation in cash flow management and its
component variables. With regard to
regression analysis results, the coefficient
for cash budgeting (β=0.601, p=0.021)
shows that cash budgeting has a statistically
significant effect on profitability. The results
of Pearson correlation analysis indicated that
cash budgeting (r=0.662, p=0.001) has a
strong positive and statistically significant
relationship with profitability. The study
recommends that SME managers ensure that
adequate cash is set aside to cater for
unforeseen negative cash flows, which was
scarcely the case, going by the findings. In
addition, it is recommended that the
government through her agencies such as the
National Chamber of Commerce and
Industry and the Small and Medium
Enterprise Authority consider financial
literacy training for SMEs to enlighten them
on best practices in business management
especially matters related to cash budgeting.
Description
A research article published in International Academic Journal of Economics and Finance
Keywords
cash budgeting, profitability, cash flow management, small and medium enterprises
Citation
Kamau, J. M. & Mungai, J. N. (2020). Cash budgeting practices and profitability of small and medium-sized enterprises in Nyeri town sub-county, Kenya. International Academic Journal of Economics and Finance, 3(6), 210-222