International Journal of Management and Commerce Innovations ISSN 2348-7585 (Online) Vol. 7, Issue 2, pp: (259-264), Month: October 2019 - March 2020, Available at: www.researchpublish.com
INFLUENCE OF WORKING CAPITAL ON THE FINANCIAL PERFORMANCE OF SUGAR INDUSTRY IN KENYA 1
Philip Ocharo, 2Oluoch Oluoch
1
MSc. Candidate Jomo Kenyatta University of Agriculture and Technology, School of Business Studies, P.O Box 6200000200 Nairobi, Kenya
2
Senior Lecturer Jomo Kenyatta University of Agriculture and Technology, School of Business Studies, P.O Box 6200000200 Nairobi, Kenya
Abstract: Proper financial planning ensures that maximization of profit and wealth creation for shareholders is achieved. The purpose of this study was to determine the influence of financial planning on financial performance of sugar industry in Kenya. The objective of the study was to determine the influence of working on financial performance of sugar industry in Kenya. The study used quantitative research design that involved computation of financial ratios to arrive at the conclusion. Secondary data was appropriate for this study because of easy access of information, involves low cost and readily available information. The study showed that there was a strong influence of working capital on financial performance of firms in sugar industry. From the study findings, it was concluded that working capital was positively related to financial performance of sugar industry in Kenya. The study concluded that Muhoroni had highest amount of working capital. Also, the study found that working capital influenced highly on financial performance of sugar industry in Kenya. Hence, the study recommended that West Kenya should employ more working capital management planning in order to improve financial planning. Keywords: sugar industry, working capital, financial performance, financial planning.
1. INTRODUCTION Financial planning is a continuous process that seeks to direct and allocate financial resources towards the attainment of strategic goals of an enterprise. Maintenance of optimal cash levels sets the foundation on which the business can minimize liquidity risks while maximizing on its income generating abilities by minimizing idle financial resources (Gerber, 2001). However, sugar industry in Kenya has been experiencing poor cash management for many decades and this industry had failed to predict the cash inflows and outflows, cash budgeting to alert the management to resource needs, and help keep payments on time. According to the Kenya sugar board (2015) established that the industry do not have strong internal control systems for managing cash. For example, lack of proper tools and techniques for credit and collection polies, procedures, and lack of separation of duties, whereby staffing levels do not permit separation of duties, compensating controls such as strict individual accountability and thorough management review and supervision. Also, the sugar industry in Kenya is one the sectors that has been experiencing so many challenges to the extent that Ramisi sugar factory collapsed in 1988, Miwani sugar factory and Muhoroni were put under receivership and Mumias sugar factory has failed to break even. The government of Kenya had pumped money to revive the company but the attempt failed to yield any tangible result. The poor state of sugar companies in Kenya together with conflicting results from other scholars on financial performance prompted this research work. Majority of studies that exist had focused on financial planning on different sectors such as cooperatives societies, commercial banks and other sectors such Mohammed (2008), Kalimalwendo, (2015) and Oduor (2013).Thus, this study intended to fill these pertinent gaps by studying the influence of working capital on performance of sugar industry in Kenya.
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