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Liquidity Management of Cement Manufacturing Companies Listed On the Nairobi Securities Exchange

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dc.contributor.author Nizigiyimana, Arthemon
dc.date.accessioned 2015-05-05T12:53:33Z
dc.date.available 2015-05-05T12:53:33Z
dc.date.issued 2014-08-30
dc.identifier.uri http://erepo.usiu.ac.ke/11732/80
dc.description A Project Report Submitted to the Chandaria School of Business in Partial Fulfillment for the Degree of Masters in Business Administration (MBA) en_US
dc.description.abstract The purpose of this study was to establish liquidity management measures of cement producing firms listed on the Nairobi Securities Exchange (NSE).The study sought to establish the measures of corporate liquidity management, the factors that affect liquidity requirements and establish the relationship between liquidity and profitability in manufacturing cement firms. Purposive sample design was applied in this study which suited to the selected samples of top cement companies of Kenyan Cement Industry namely Athi River Mining, Bamburi Cement and East African Portland Cement. Secondary data extracted from the income statements, balance sheets of sampled firms from the company annual report accessible from the Nairobi Securities Exchange database and the website were used covering a period of five years starting from 2008 to 2012. Data was analyzed by use of descriptive statistics and relationship drawn using multiple regression analysis. This study showed that liquidity is measured by Current Ratio, Quick Ratio and Cash Ratio. The research findings revealed that the mean values of current ratio was 1.71 which is below the standard conventional rule of 2:1.This indicated that on average the listed cement companies might find difficult to meet their short term maturing obligations. However, with the maximum of 2.22 for the current ratio showed that some of the companies were doing very well liquid wise, as they were not likely to encounter any difficulty in meeting their short term obligations. On an average the quick ratio was 1.09 which was satisfactory compared to the standard conventional rule of 1:1. The findings of this study further showed that liquidity measured by current ratio is influenced by cash conversion cycle measured by inventory turnover, receivables collection period and payables payment period. Regression analysis was carried out to examine the relationship between liquidity and cash conversion cycle. The results revealed that variation in current ratio was explained by the number of days of cash conversion cycle. The findings showed that a satisfactory cash conversion cycle had a positive impact on current ratio while unsatisfactory cash conversion cycle had a negative impact on liquidity measured by current ratio. There exists a relationship between liquidity and profitability indicators. The investigation using both correlation and regression analysis revealed that liquidity ratios measured by Current Ratio, Quick ratio and cash conversion cycle have a relationship with profitability measured by return on capital employed. The findings revealed that Current Ratio and Quick Ratio were positively associated with return on capital employed while cash conversion cycle was negatively associated with Return on Capital Employed. The study concluded that liquidity position based on quick ratio was more satisfactory in case of BMBC and EAPC and unsatisfactory in case of ARML. Cash conversion cycle was on decreasing trend. Cash conversion cycle was satisfactory in case of BMBC and EAPC and had a positive impact on liquidity. Cash conversion cycle was unsatisfactory in case of ARML and had a negative impact on liquidity. The analysis showed that BMBC and EAP were able to meet their short term obligations over the study period but ARML was unable to meet its short compulsions. This study recommends that to ensure better liquidity management, that is shorter cash conversion cycle, which would invariably lead to better profitability in the cement industry, the duration of time that goods are held in inventory should be reduced. This can be accomplished by improving the inventory control process .Also accounts receivables should be collected more quickly by improving the efficiency of the collection process as debt should be collected in line with the agreed credit terms. Managers should try to delay payables because it will provide them opportunities to invest in different profitable areas thus increasing the firm’s profitability. en_US
dc.publisher United States International University - Africa en_US
dc.subject Liquidity Management en_US
dc.title Liquidity Management of Cement Manufacturing Companies Listed On the Nairobi Securities Exchange en_US
dc.type Thesis en_US


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