Abstract: The inability of manufacturing firms to grow at the target rate of 8% per annum is slowing down the realization of vision Kenya’s 2030. This is because the target can only be steered by an increase in profits. Managing working capital efficiently is vital to the overall corporate strategy of firms in creating shareholders value and wealth maximization. Limited studies have been conducted on working capital management (WCM) and its effect on profitability considering inflation as a moderator between the variables since vision 2030 was launched in Kenya thus leading to the study. The study was informed by components of working capital which are cash, inventory, debtors’, creditors’ management and the moderating effect of inflation to form the specific objectives. Findings from the regression analysis indicated that cash management has a negative and insignificant effect on profitability, inventory management has no significant effect on profitability, debtors’ management has a negative and significant effect on profitability while creditors’ management has a positive and significant effect on profitability. The test for moderation revealed that inflation has an insignificant moderating effect on the relationships between cash management, inventory management, creditors’ management and profitability while it has a significant moderating effect on the relationship between debtors’ management and profitability. The study recommends that management should ensure high inventory levels to reduce the costs of possible interruptions in the production process, negotiate shortest periods possible for payments of debts as longer payment periods decrease profitability, negotiate for longer payment period for paying creditors so as to invest in other profitable portfolios and lastly come up with structures to reduce credit sales since these debts are easily depleted by inflation.
Keywords: working capital management, cash, inventory, debtors, creditors, inflation, profitability, manufacturing firms and vision 2030.
Title: WORKING CAPITAL MANAGEMENT AND PROFITABILITY OF MANUFACTURING FIRMS LISTED AT THE NAIROBI SECURITIES EXCHANGE, KENYA
Author: Fredrick Maundu Kitili, Dr. Ambrose Jagongo
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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