EFFECTS OF WORKING CAPITAL MANAGEMENT PRACTICES ON FINANCIAL PERFORMANCE OF SELECTED SUPERMARKETS WITH NATIONAL NETWORK IN KENYA

Abstract

The purpose of this study was to determine the effect of working capital management practices on financial performance of selected supermarkets with national network in Kenya. The specific objectives are as stated herein: to assess the effect of inventory management practices, creditor’s management practices, liquidity management practices, and debtor’s management practices on financial performance of selected supermarkets with national network in Kenya as of August 2019, and to determine the combined effect. The following five theories guided this study: agency theory, the operating cycle theory, resource-based theory, shareholders theory and cash conversion cycle theory. The research design which was adopted by this study was descriptive research design. The target population consisted of supermarket branches located in Nairobi namely: Tuskys supermarket (24 branches), Naivas Supermarket (23branches), Uchumi supermarket (7 branches) and Nakumatt supermarket (6 branches). Individuals targeted were a manager in each branch of the four supermarkets making a total of 60 respondents. Sample size consisted of 52 respondents and both the stratified and random sampling methods were used to generate the sample. Validity was achieved by identifying and changing any ambiguous questions through the supervisors support. Reliability was tested by pre-testing ten questionnaires which were pilot tested in Spear and Jamaa supermarkets in Laikipia County. Both descriptive and inferential data analysis were carried out. In descriptive data analysis, data were summarized, analyzed into frequency, percentage tables, Mean and mode. In inferential data analysis, correlational, regressional and ANOVA analysis were conducted, through which the relationship between dependent and independent variables were reflected. In order to predict the value of the dependent variables versus the independent variables, regression analysis was used. The study revealed that inventory management, creditors’ management, liquidity management and debtor’s management practices had a very low effect on financial performance of supermarkets in Kenya. Supermarkets are experiencing increase in cost of holding stock due to unskilled personnel charged with management of inventory tools. With reference to these conclusions it is recommended that it is advisable that supermarkets introduce a system where managers are trained continually on management of working capital and other related skills. This should be done to prevent occurrence of the same problems in future. The study is expected to be helpful to various stakeholders; academicians, strategy makers and government agencies. The findings of the study have contributed to the body of knowledge related to working capital management in firms similar to Supermarkets such as wholesale and retail shops.