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Exploring the Relationship between Working Capital Management, Liquidity, and Financial Performance within the Context of Kenyan SME’s

Author

Listed:
  • Frankline Chasha Sogomi

    (Department of Accounting and Finance, Technical University of Mombasa, Kenya)

  • Mary Kavele Patrick

    (Department of Accounting and Finance, Technical University of Mombasa, Kenya)

  • Charles Guandaru Kamau

    (Department of Accounting and Finance, Technical University of Mombasa, Kenya)

Abstract

The concept of working capital revolves around the effective administration of short-term assets and liabilities within an organization, with the ultimate goal of augmenting profitability and safeguarding against potential insolvency scenarios. In this scholarly article, we undertake a thorough evaluation of the intricate relationship between working capital management, liquidity, and financial performance within the context of Kenya, with a particular focus on small and medium enterprises. Our analysis primarily relies on an exhaustive review of pertinent academic literature that delves into the subject matter at hand. A noteworthy observation that emerged from this investigation was the realization that inadequate working capital management has the potential to precipitate the downfall of even the most prosperous corporations. The majority of the scrutinized literature unequivocally posits that a strong correlation exists between working capital management and profitability. Moreover, it is imperative to acknowledge the pivotal role played by liquidity, firm size, leverage, and various other financial ratios, as these factors constitute integral components of the overarching framework of working capital management.

Suggested Citation

  • Frankline Chasha Sogomi & Mary Kavele Patrick & Charles Guandaru Kamau, 2024. "Exploring the Relationship between Working Capital Management, Liquidity, and Financial Performance within the Context of Kenyan SME’s," African Journal of Commercial Studies, African Journal of Commercial Studies, vol. 4(2).
    • Handle: RePEc:cwk:ajocsk:2024-10
    DOI: 10.59413/ajocs/v4.i2.4
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    References listed on IDEAS

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    1. Claudiu Boțoc & Sorin Gabriel Anton, 2017. "Is profitability driven by working capital management? evidence for high-growth firms from emerging Europe," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 18(6), pages 1135-1155, November.
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    Cited by:

    1. Rodgers Kazungu Safari & Getrude Majalla Mwanyefa, 2024. "Working Capital Management in Times of Crisis in Kenya: Strategies for Resilience," East African Finance Journal, East African Finance Journal, vol. 3(2).
    2. Nguyen Hoang Phi Nam & Tran Thi My Tuyen, 2024. "Impact of liquidity on capital structure and financial performance of non-financial-listed companies in the vietnam stock market," Future Business Journal, Springer, vol. 10(1), pages 1-19, December.

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