Effect of Working Capital Management Decisions on the Financial Performance of Tea Firms in Kenya

Abstract

Specific objectives of the study were to determine the effect of the accounts receivables period, accounts payables period, inventory conversion period, cash conversion cycle, financing policy, investing policy and moderating effect of ownership structure on financial performance. The study illustrated that accounts receivables collection period is negatively related to return on assets (β = -0.1299, p=0.0160), accounts payables payment period is negatively related to return on assets (β = -0.0843, p = 0.0070), inventory conversion period is negatively related to return on assets (β= -0.0623, p=0.0180), cash conversion cycle is negatively related to return on assets (β = -0.1107, p = 0.0030), financing policy is positively related to return on assets (β = 0.1589, p = 0.0000), investing policy is positively related to return on assets (β = 0.0291, p = 0.0000). Ownership structure moderates the relationship between working capital management decisions and financial performance of tea firms in Kenya.