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Factors Affecting Working Capital Management Practices In Small and Medium Enterprises in Nairobi

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dc.contributor.author Ndagijimana, Jean Paul
dc.date.accessioned 2015-05-05T13:16:00Z
dc.date.available 2015-05-05T13:16:00Z
dc.date.issued 2014-08-30
dc.identifier.uri http://erepo.usiu.ac.ke/11732/83
dc.description A Research Project Report Submitted to the Chandaria School of Business in Partial Fulfillment of the Requirement for the Degree of Masters in Business Administration (MBA) en_US
dc.description.abstract The main purpose of this study was to investigate the factors affecting working capital management practice in small and medium enterprises in Nairobi. In order to realize this, three research questions guided the process. These were i) to what extent does management of accounts receivable affect working capital management practice in small and medium enterprises in Nairobi? ii) to what extent does the management of accounts payable affect working capital management in small and medium enterprises in Nairobi? and iii) how does the cash conversion cycle affect working capital management in small and medium enterprises in Nairobi? To realize this, a descriptive research design was adopted. The total population of this study comprised of all registered SMEs in Nairobi with the Federation of Small and micro enterprises estimated at four hundred and twenty six from which a sample of eighty four was drawn using simple random sampling. Data was collected using structured questionnaire with the assistance of trained research assistants. Data collected was cleaned, coded and formatted before being analyzed using SPSS to obtain both descriptive and inferential statistics. The study revealed that accounts receivable management affect working capital management practice in small and medium enterprises in Nairobi. It was evident that majority of the respondents (73.3 percent), get their raw materials locally, while it was also revealed that SMEs lack requisite inventory management tools that could be essential in the reduction of pile up of raw materials. In the same regard 76.7 percent agreed, that indeed they keep records of goods and materials and finally majority for the SMEs were seen to carry out stock taking daily. Regression results also showed a positive relationship between accounts receivables and working capital management practice in SMEs. The study further revealed that accounts payable management affect working capital management in small and medium enterprises in Nairobi. Additionally the study revealed that credit purchase has been adopted largely in the SME sector. Respondents also agreed that they are allowed a credit period that range from 7 days to more than 21 days. Similarly respondents agreed that they indeed negotiate with debtors to the extent of the credit period. A regression analysis showed a positive significant relationship between accounts payable management and working capital management. Finally it was revealed that cash conversion cycle management affect working capital management in small and medium enterprises in Nairobi. Additionally majority of the SMEs were seen to have gotten their finances from banks, friends and self-financing respectively. In the same regard, it was revealed that SMEs have cash targets though most of them simply keep their cash in cash tills, while a few others spend their proceeds. The study recommends that SMEs need to be cautious about their accounts receivables position given that if this is not properly managed, there is likelihood that it will dwindle their performance. In this regard therefore the study recommends that SMEs need to balance between credit sales and cash sales so as to avoid running into a put into cash strap position. The study also acknowledges the important role played by accounts payable in working capital management practice and as such the study recommends the need for SMEs to put in place tools to effectively manage accounts payables so as to enhance the efficiency off the business process and to avoid the challenges that are likely to emanate from overreliance on debts. Finally, the study recommends that SMEs should adopt the culture of standard liquidity position so as to reduce the risk of losses as a result of too much cash at the business place which might dent the performance of SMEs. en_US
dc.publisher United States International University - Africa en_US
dc.subject Small and Medium Enterprises en_US
dc.title Factors Affecting Working Capital Management Practices In Small and Medium Enterprises in Nairobi en_US
dc.type Thesis en_US


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