Cash Flow Management and Financial Performance of Firms Listed Under Manufacturing Sector at the Nairobi Securities Exchange, Kenya
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Date
2022
Authors
Ngaruiya, Paul Mburu
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Nairobi Securities Exchange listed companies in the manufacturing sector released financial reports in 2010 to 2019 showing declining revenue and issuing profit warnings, depicting a retinue of listed manufacturing companies struggling to sustain profitability. The poor output reflects a sector whose fortunes are fading, amid the government's expectations that it will be a stronghold for economic growth. The ultimate purpose of this study was therefore to determine the effect of cash flow management on financial performance of listed manufacturing firms in Kenya. The objectives guiding the analysis; to evaluate how net cash from operating activities, to evaluate the effects of net cash used in investing activities and to determine the effect of net cash used in financing activities on listed manufacturing companies in Nairobi Securities Exchange. Keynessian theory of money, stakeholders theory, Baumol model theory and free cash flow theory were used. The target population were the 8 listed manufacturing companies listed in Nairobi Securities Exchange. Secondary data was collected from published financial statements. Causal effect research design was used. Quantitative analysis was used and panel data presented in a random effect panel regression model. The findings indicate that net cash from the operating activities had a significant positive effect on return on equity. The results indicated that cash used in the investing activities significant and positively affected return on equity. The study found that net cash used in financing activities had no significant effect on financial performance. The study recommends that policy should be put in place by the directors of various manufacturing companies to concentrate on fast moving inventory which will eventually affect other components of operating activities. Cash used in the purchase of property, purchase of plant and equipment, purchase of intangibles, purchase of investment property and net investment in government securities should be carefully invested for the purposes of maximizing the value of the companies.
Description
A Research Project Submitted to the School of Business for the Partial Fulfilment for the Award of Master Degree in Business Administration (Finance Option) at Kenyatta University July, 2022
Keywords
Cash Flow Management, Financial Performance, Firms, Manufacturing Sector, Nairobi Securities Exchange, Kenya