Working Capital Management and Profitability of Security Companies in Mombasa County, Kenya
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Date
2023
Authors
Mutembete, Edyline Musanya
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta university
Abstract
The aim of working capital management is to make sure a firm continues with its
operations and has enough ability to satisfy both maturing short-term debt and upcoming
operational expenses. In almost all cases, security firms are affected by poor financial
performance due to their unique approach to the management of working capital which
involves more of accounts receivables than any other working capital management
practices. The purpose of this study was to investigate the effect of working capital
management on profitability of security companies in Mombasa County. The specific
objectives of the study were to establish the relationship between cash management and
profitability, to determine the influence of inventory management on profitability, to
ascertain the relationship between accounts receivable management and profitability and
to find out the relationship between accounts payable management and profitability of
Security Companies in Mombasa County. The study covered a period of five years from
2016 to 2020. The study was informed by agency theory, resource-based theory and
efficient asset management theory. Descriptive research design and cross sectional survey
designs were employed in the study. The target population of the study was the 31 finance
managers from the 31 security companies selected. The researcher utilized purposive
sampling design. Primary data was collected using structured questionnaires. Data was
analyzed using both inferential and descriptive statistics with the help of SPSS version 22.
Descriptive statistics consisted of mean and standard deviation. Inferential statistics
consisted of multiple regression analysis that were done to establish the relationship
between dependent and independent variables. Diagnostic tests that were done to
establish the significance of the model were normality test, heteroscedasticity,
autocorrelation and multicollinearity. Data presentation was done by use of figures and
tables. The study found that the security companies have been invoicing promptly to
manage their accounts receivables. The study also found that factors of accounts
receivable management affect profitability. The study concluded that accounts receivable
management entails managing the firm's inventory and receivables in order to achieve a
balance between risk and returns and thereby contribute positively to the creation of a
firm value. In relation to policies the study recommends that accounting curriculum
should be developed consistently to the changing role of accountants. Accounting
Education must equip their students with capabilities in coping with the rapid changing of
the business environment so that they can always provide relevant management
accounting information to managers.
Description
A Research Project Submitted to the School of
Business, Economics and Tourism in Partial Fulfillment
of the Requirements for the Award of the Degree of
Master of Business Administration (Finance Option) of
Kenyatta University
Keywords
Working Capital Management, Security Companies, Mombasa County, Kenya