Cash Management Practices and Profitability of Star Rated Hotels in Nairobi City County, Kenya
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Date
2019
Authors
Cherono, Joel Chebon
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Globally, successful operation of the firm is dependent on sound management of cash receipts,
payments and balances. The study sought to establish the effect of cash management practices on
profitability of star rated hotels in Nairobi City County, Kenya. Hotels in Kenya have been
performing poorly due to dwindling profitability that has been blamed on cash management
problems. However, few studies have been carried out to establish whether cash management is
leading to dwindling profitability among star rated hotels in Nairobi Kenya. The specific
objectives was determine the effect of cash budgeting, cash forecasting, liquidity control and
centralized banking on profitability of hotels in Nairobi City County. Research was limited to star
rated hotels in Nairobi City County. The study reviewed three cash theories management theories
including; Boumol model, Beranek's Model, Miller-orr model. The research adopted descriptive
research design. The target population was 40 star rated hotels in Nairobi City County. The
sample size was 16 hotels. Stratified random sampling procedure was adopted where hotels were
stratified based on their star level that is 2, 3 4 and 5 stars. The study used purposive sampling to
identify the research respondents including accountant, finance manager, credit managers and
internal auditors. The study therefore picked four officers from each hotel to participate in the
study hence 64 officers were the unit of analysis. The study used structured questionnaires to
collect data from respondents. The research instrument was delivered by researcher through drop
and pick later method. The study established the validity of the questionnaires by getting the
opinion of finance experts to give their views on the validity of the questionnaires. The reliability
was determined based on internal consistency method where Cronbach’s alpha for each variable
was calculated. A Cronbach’s alpha of 0.70 and above was acceptable for reliability with all
variables having a Cronbach’s alpha above 0.7. Filled questionnaires were coded and keyed into
Statistical Package for Social Science (SPSS). Data were analyzed using descriptive and
inferential statistics. The descriptive statistics included percentages, frequencies, mean and
standard deviation. The inferential statistics used was correlation and multiple regressions
analysis in examining the relationships among dependent and independent variables. The study
ensured the names and identities of the participants remained anonymous. Second, all participants
who participated at their free will and they were not required to sign any disclosures. The study
established that Cash forecasting and liquidity control had a statistically significant positive effect
on profitability of start rated hotels in Nairobi City County. However, cash budgeting and
centralized banking had a positive but statistically insignificant effect on profitability of start rated
hotels in Nairobi City County. Study thus concluded that cash forecasting had a major positive
effect on profitability of start rated hotels in Nairobi City County. The study also concluded that
liquidity control had a major positive effect on profitability of start rated hotels in Nairobi City
County. It was also concluded that cash budgeting had a positive but minor effect on profitability
of start rated hotels in Nairobi City County. Additionally, the effect of centralized banking
profitability of start rated hotels in Nairobi City County was not major. Study recommended that
top management should continue preparing cash budgets, setting in place strong liquidity control
measures to ensure the respective hotels have adequate liquid cash to take care of maturing
obligations and make short-term investments and implementing centralized banking to ensure
centralized revenue collection. The study suggest that future research to include all major hotels
within the country and that another study should be carried out with more cash management
variables beyond what was carried out in this study. The study faced the challenge of some
respondents being a little hesitant during the day of study.
Description
A Research Project Submitted In Partial Fulfilment for the
Award of the Degree of Master of Business Administration
(Finance Option), School of Business, Kenyatta University
Keywords
Cash Management Practices, Star Rated Hotels, Nairobi City County, Kenya