Working Capital Management Practices and Financial Performance in Kenya

Duncan Odhiambo Ogutu
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Duncan Odhiambo Ogutu: African Journal of Commercial Studies

African Journal of Commercial Studies, 2022, vol. 1, issue 2

Abstract: Gross working capital and net working capital are the two components that can be used to establish the working capital concept. Between current liabilities and current assets, there is a difference called net working capital. Accounts receivable, cash, and inventory are examples of current assets because they are easily convertible into cash; on the other hand, current liabilities are those that are owed to the company right away, such as accounts payable, bills payable, and other financial instruments. This paper appraises the interactions between working capital management in terms of cash, inventories, receivables, and payables management in relation to financial performance. The study also highlights two theories relating to working capital management: the liquidity preference theory and the cash conversion cycle. The study concludes that different working capital components have varying effects on the financial performance of manufacturing enterprises. Some studies reveal a favorable association between the components of working capital, whereas others reveal a detrimental relationship.

Keywords: Financial Performance; working capital management; Receivables and payables management; Cash management; inventory management (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:cwk:ajocsk:2022-07

DOI: 10.59413/ajocs/v1.i2.2

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