This study will target 735 manufacturing companies divided into 14 categories located in Nairobi. A stratified sampling method will be used to determine the population sample guided by Naasiuma Model to come the sample size. Secondary data will be collected based on the financial statements as well as data from KAM website. Collected data will be prepared and then analyzed by use of STATA software. Diagnostic tests will carried out to ensure that the classical linear modeling assumptions are not violated. Collected data will then be subjected to various analytical tools like Mean, Standard deviation, Correlation and Regression analysis so as to achieve the objective of the study. Finally the analyzed information will be presented in tables, charts and figures to aid in recommendation and future decision making.
Cash flow shortfall has proved to be one of the issues facing manufacturing companies in Nairobi. Companies with cash flow problems have witnessed a lot of struggle when it comes to settling their credit commitments whenever they fall due. In some cases, the effect has resulted into extreme losses, low profits, business operation difficulty and high financial costs due to excessive borrowing. The general objective of this study is to determine the effect of cash flow management activities on the financial performance of manufacturing companies in Nairobi. To achieve this objective this study will examine how the three main components of cash flow statement component impact on the financial performance of companies under the scope. Cash flow activities according to Kew et al are cash flow from operating activities, cash flow from investing activities and cash flow from financing activities. To measure the financial performance of manufacturing companies, the study will apply two key financial ratios which include Return on Equity (ROE) and Return on Assets (ROA). Independent variables will be measured using net values of each activity as reported in the cash flow statement. The study will adopt a descriptive research design.
Table of Contents
CHAPTER ONE
1.1 Background of the Study
1.2 Statement of the Problem
1.3 Research objective
1.4 Research Questions
1.5 Justification of study
1.6 Scope of the study
CHAPTER TWO
2.1 Introduction
2.2 Theoretical Review
2.3 Empirical Review
2.4 Knowledge Gap
2.5 Conceptual framework
2.6 Operationalisation of Variables
CHAPTER THREE
3.1 Introduction
3.2 Research design
3.3 Target Population
3.4 Sampling and sampling procedure
3.5 Data Collection Instrument
3.6 Data collection procedure
3.7 Data Processing and analysis
3.8 Research Ethics
Research Objectives and Themes
The primary objective of this study is to analyze the influence of cash flow management activities on the financial performance of manufacturing companies based in Nairobi, specifically focusing on how operating, investing, and financing cash flows impact firm profitability and stability.
- The role of operating cash flow in maintaining liquidity and supporting daily business operations.
- The impact of investing activities on long-term growth and capital expenditure efficiency.
- The significance of financing cash flows, including debt management and equity capital, on corporate performance.
- Application of financial ratios (ROE and ROA) to measure the success of cash management strategies.
- Evaluation of existing theoretical models, such as the Cash Conversion Cycle and the Miller-Orr Model, within the context of the manufacturing sector.
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1.1 Background of the Study
Cash is a medium of exchange and basis through which measurement of accounting for all financial statement components. Cash must be available to enable organizations settle their obligations in time to avoid contractual obstacles that may lead to incompliance (Ernest & Young LLP, 2018). Cash flow is also referred to as the amount of money that is disbursed and received from different daily activities but excluding solid inventory in store, receivables not yet settled by customers and assets owed or possessed (Kakuru, 2003).
Cash flow management has become an important aspect of the operational strategies and planning of many organizations. Availability of cash plays an important role in the operational as well as financial well being of organizations. Managers of many companies look at cash flow management as the core to the going concern mainly with great emphasis on the financial objectives (Okello and Uwondo, 2013). It is therefore important for organizations to align to cash flow management policies that can properly manage the working capital which include cash sales and debtors collection from stock holdings, to customer account and release of payments to suppliers in order to boost financial performance (Okello and Uwondo, 2013). In accounting and finance perspective, cash flow includes the amount of money in the business at the start of the financial period vis-a-vis cash balances at the closing date of company’s financial period (Faulkender, Flannery, Hankins, & Smith, 2012). According to (Frank and James 2014), cash flow is the net liquid amounts put together with the equivalents of cash that come into and move out of an organization.
Summary of Chapters
CHAPTER ONE: Introduces the background of cash flow management in manufacturing, identifies the core problem of cash flow shortages, and outlines the research objectives and scope.
CHAPTER TWO: Provides a comprehensive theoretical and empirical review, analyzing key models like the Cash Conversion Cycle and Keynesian Theory in relation to cash flow management.
CHAPTER THREE: Details the research methodology, including the descriptive research design, sampling of 88 manufacturing firms, and data collection and analysis procedures using STATA.
Keywords
Cash flow activities, Financial performance, Return on Equity (ROE), Return on Asset (ROA), Manufacturing companies, Nairobi, Working capital, Cash conversion cycle, Liquidity, Debt management, Investing cash flow, Operating cash flow, Financing cash flow, Financial statements, Corporate profitability.
Frequently Asked Questions
What is the core focus of this research?
The research examines the relationship between cash flow management activities and the financial performance of manufacturing companies in Nairobi, Kenya.
What are the central themes of the study?
The study centers on the three main components of cash flow statements—operating, investing, and financing activities—and how they impact a firm's profitability and financial health.
What is the primary research goal?
The primary goal is to determine whether effective cash flow management significantly influences the financial performance of manufacturing firms, measured through Return on Equity (ROE) and Return on Assets (ROA).
Which scientific methodology is employed?
The study utilizes a descriptive research design, gathering secondary panel data from 88 sampled manufacturing firms over a five-year period (2011–2016), analyzed via STATA software using correlation and linear regression analysis.
What topics are covered in the main body?
The main body covers a theoretical review of cash management models, an empirical review of existing global and local studies, and a detailed research methodology section covering target population, sampling, and analytical tools.
What are the key terms associated with this work?
Key terms include Cash flow activities, Financial performance, Return on Equity (ROE), Return on Asset (ROA), Working capital, and liquidity management.
Why are the Cash Conversion Cycle and Miller-Orr Model relevant?
These models are relevant as they provide the theoretical framework for understanding optimal cash balances, liquidity, and the timing of cash inflows and outflows within manufacturing processes.
How is the sample for the study determined?
The sample size of 88 companies is determined using the Naasiuma (2000) Model, based on a target population of 735 registered manufacturing companies in Nairobi.
- Arbeit zitieren
- Wycliffe Motende (Autor:in), 2019, Effect of cash flow management activities on financial performance of manufacturing companies in Nairobi, München, GRIN Verlag, https://www.grin.com/document/497193
