Working Capital Management and Profitability of Tea Factories Managed by KTDA in Kirinyaga and Embu Counties – Kenya
Loading...
Date
2024-07
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
The current study seeks to establish the effect of working capital management and profitability of tea factories in Kirinyaga
and Embu Counties, Kenya. The overall objective of the current study was to ascertain the effect of working capital
management and profitability of tea factories in Kirinyaga and Embu Counties, Kenya. The main objective of the study was to
determine the influence of working management practices on profitability of tea factories in Kirinyaga and Embu Counties,
Kenya. The research was anchored on pecking order theory, transaction cost theory, financing advantage theory, and cash
conversion cycle. The study found the existence of a strong and positive correlation between Average payment period,
Average Collection Period, Inventory turnover, and Cash Conversion on financial profitability of tea processing factories.
Average payment period helps to manage WC since delays in bill payments is an approach that can help factories to access
cheaper or competitive sources of funds. There was a positive correlation between inventory turnover and profitability
performance in tea factories. Efficient and effective management of inventory enables business survival, profit maximization,
and an efficient management of working capital. The study established a positive association between accounts receivable and
profitability performance among tea factories, where a unit change in Average Collection Period has a positive change on
profit performance in tea factories. Effective management of accounts receivables results in enhanced liquidity that enables tea
factories to meet and realize their financial commitments and equally be able to seize opportunities emerging in the market. In
conclusion, there is a positive relationship between Average payment period and profitability. Credit collection policies that
enable low Average Collection Period will ensure healthy cash flows and enhanced liquidity position for the firm. Effective
and efficient management of receivables results in the increase of firm size, sale, and enhanced liquidity. Inventory turnover
negatively impacts profitability performance in tea factories, while efficient inventory management and effective control helps
in achieving adequate operational results and lessening investment in working capital. Consequently, the study recommends
that: factory firms should maintain optimal levels of financial leverage Tea factories must create a credit collection policy
detailing the practices and procedures to be applied by the factories to achieve outstanding AR. Tea factories should generally
maintain Average payment period higher than Average Collection Period to lessen investment in receivables, meet short time
obligations and minimize cost of funds
Description
Keywords
Citation
Mbogo, M. G. (2025). Project management capabilities and sustainability of water projects funded by Embu County Government, Kenya (Doctoral dissertation, Kenyatta University).