David Ngugi Kinuthia, Jeremiah Koori Maimba, Lucy Wamugo Mwangi


The purpose of this study was to determine the relationship between the working capital management and the financial performance of the listed manufacturing firms in Kenya. The specific objectives of the study were to determine the effect of inventory turnover days, debtors collection period, creditors payment period and cash flow ratio on the financial performance of listed manufacturing companies in Kenya. In addition, the study sought to establish the moderating effect of annualGDPgrowth rate on the relationship between the working capital management and financial performance listed manufacturing companies in Kenya. The study was guided by agency, corporate risk management and Miller-Orr theories. Descriptive, correlational and quantitative research designs were used in the study. Secondary panel data was collected from annual financial reports and financial statements of listed companies in Nairobi Securities Exchange using data collection sheets. The study adopted census of the twenty listed manufacturing companies in the NSE from 2010 to 2017. The study established that debtors collection period has a negative effect on financial performance of manufacturing firms. The study reveals that creditors payment period positively affects the financial performance (EVA and ROA). Operating cashflow ratio had a statistically significant positive relationship with ROA, but an insignificant one with EVA. Inventory turnover days had a significant positive relationship with ROA but a negative insignificant relationship with EVA. Gross domestic product was found to moderate the relationship between working capital and financial performance. The study concludes that working capital management has a significant relationship with financial performance. The study recommends that manufacturing manage their working capital effectively taking consideration of theGDPin order to enhance the financial performance of manufacturing firms in Kenya. A similar study with a longer period and more variables was recommended.

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