The data was analyzed using both descriptive and inferential statistics. Consequently, the findings of the study were that, working capital management practices were low amongst SSEs as majority had not adopted formal working capital management routines and their financial performance was on a low average. The study also revealed that SSE financial performance was positively related to efficiency of cash management (ECM), efficiency of receivables management (ERM) and efficiency of inventory management (EIM) at 0. 1 significance level. The coefficient of determination (R2) indicated that 63. 4% of the variations in financial performance (FP) could be explained by changes in ECM, ERM and EIM. The study concluded that working capital management practices have influence on the financial performance of SSEs, hence there was need for SSE managers to embrace efficient working capital management practices as a strategy to improve their financial performance and survive in the uncertain business environment.
The Term Paper on Financial Discipline Working Capital
... management 2. Working capital management 3. Budgetary control 4.Cost control 5. Auditing 6. Corporate tax planning 7. Financial ... and control responsibilities; (2) to help management evaluate the performance resulting from delegated responsibilities and authority; ... management. Second and most important is working capital management.First let us study about the factors influencing the working capital ...
The study corroborates other research findings that established a positive relationship between working capital management practices and financial performance. Key words: Working capital management, financial performance, small scale enterprises. INTRODUCTION Management of working capital which aims at maintaining an optimal balance between each of theworking capital components, that is, cash, receivables, nventory and payables is a fundamental part of the overall corporate strategy to create value and is an important source of competitive advantage in businesses (Deloof, 2003).
In practice, it has become one of them important issues in organizations with many financial executives struggling to identify the basic working capital drivers and the appropriate level of working capital tohold so as to minimize risk, effectively prepare for uncertainty and improve the overall performance of their businesses (Lamberson, 1995).
The existence of efficient working capital management practices can make a substantial difference between the success and failure of an enterprise and it is of particular importance to the managers of small scale enterprises, because it is they who strive for finances and the opportunity cost of finances, for them is usually on the higher side (Kwame, 2007).
As established by Padachi (2006), efficient management of working capital is vital for the success and survival of the SSEs which needs to be embraced to enhance performance and contribution to economic growth. However, as observed by Atrill (2006), there is evidence that many small scale enterprises are not very good at managing their working capital despite their high investments in current assets in proportion to their total assets and this has been a major cause of their high failure rates as compared to large businesses.
According to him, majority of the small scale enterprises operate without credit control department implying that both the expertise and the information required to make sound judgments concerning terms of sales may not be available. They also lack proper debt collection procedures, hence, they tend to experience increased risks of late payment and default by debtors who tend to increase where there is an exclusive concern for growth;in this case, small scale enterprises may not be too willing to extend credit to customers who have poor credit risks.
The Essay on Small capital in Philippines
This chapter consists of brief summary of articles, findings of the study that are related to the present study. It contains foreign and local literature, foreign and local studies. Local Literature According to Mishell M. Malabaguio of entrepreneur magazine Philippines, Small capital, easy set-up and a good chance of success are just some of the reason why Food Cart Business is thriving in the ...
Also, in a recent study by Bowen et al. (2009) debt collection was identified by 55% to be among the top fivemajor challenges facing micro and small businesses. In Kenya, small scale enterprises are acknowledged as vital and significant contributors to economic development through their critical role in providing jobopportunities, reducing poverty levels, nurturing theculture of entrepreneurship and are a vital link in the economy through their supply hain and intermediary role in trade (Oketch, 2000).
According to the Economic Survey of 2006, small scale enterprises contributed over 50% of new jobs created in the year 2005 and over 20% to the GDP of the country. In recognition of this indispensable role, the government has instituted enterprise support programmes including the introduction of Women and Youth Enterprise Funds in the years 2006 and 2007 respectively to fuel the development of these enterprises.
Also, many micro finance institutions have joined the foray in providing them with microcredit hence, seeing their access to microcredit increase from 7. 5% in2006 to 17. 9% in 2009 (FSD Kenya, 2009).
However, the International Labour Organization (2010) estimates that two-thirds of the enterprises were generating income equal to or below the minimum wage, a sobering finding that must temper one’s enthusiasm for the growth of SSE’s as a solution to the country’s poverty and employment problems.
Despite their significance and the increased efforts by the government of Kenya and other stakeholders toensure the success of small scale enterprises, past statistics indicate that they exhibit high birthrates and high death rates with 40% of the startups failing by year two and at least 60% closing their doors by year four (Kenya National Bureau of Statistics, 2007; Fina Bank Report, 2007).
Also a study by Bowen et al. 2009) established that up to 50 % of the small businesses in operation have a deteriorating performance and are said to stagnate at ‘small’ level hence do not progressively grow into medium or even large enterprises as envisaged in their conceptual plans. In a study by Bowen et al. (2009), up to 53% of the respondents identified lack of working capital caused by the inability of the owners to manage their working capital efficiently as one of the greatest challenge that SSEs face.
The Essay on Operations And Cash Management At Wal mart
OPERATIONS AND CASH MANAGEMENT AT WAL-MART Introduction Effective cash management techniques are crucial to the success of any business. Figuring out how to deal with cash inflows and outflows, how and when to pay account payables and collect account receivables, and when and how to invest profits to make a company stronger are just a few areas that any company concerns itself with on daily basis. ...
As observed by Mead (1998), the health of the economy as a whole has a strong relationship with the health and nature of small enterprise sector and given their importance to a nation’s economic growth and the role that they play in poverty reduction, an understanding of the problems negatively affecting small businesses in Kenya is a vital first step in managing and avoiding the massive failure of these small businesses (ILO, 2010).
Based on this background, the study was designed to assess the effect of working capital management practices on the financial performance of SSEs in KisiiSouth district, Kenya. The study was guided by the following specific objectives: 1. To establish the working capital management practices of small scale enterprises in Kisii South District. 2. To evaluate the financial performance of small scale enterprises in Kisii South District. 3.
To establish the relationship between working capital management practices and financial performance ofsmall scale enterprises in Kisii South District LITERATURE REVIEW Working capital management is a very important component of corporate finance because it directly affects the liquidity, profitability and growth of a business and is important to the financial health of businesses ofall sizes as the amounts invested in working capital are often high in proportion to the total assets employed (Atrill, 2006).
It involves the planning and controlling of current assets and liabilities in a manner that eliminates the risk of inability to meet short-term obligations and avoid excessive investments in these assets (Lamberson,1995).
This management of short-term assets is as important as the management of long-term financial assets, since it directly contributes to the maximization of a business’s profitability, liquidity and total performance. Consequently, businesses can minimize risk and improve the overall performance by understanding the role and drivers of working capital (Lamberson, 1995).
Also, established by several researchers (Peel and Wilson, 1997; Padachi, 2006; Kotut, 2003) efficient management of working capital is pivotal to the health and performance of small firms hence their view that firms should employ the use of efficient working capital management practicesas a strategy of improving their value. The investigation on the working capital management is focused on three constructs: cash management practices, receivables management practices and inventory management practices.
The Essay on Cash Management
Cash management techniques are an important part of managing finances. It is impossible to see your money grow if there are not methods in place to make the most of the money that you have. A good start to cash management is budgeting, which is the process of tracking money in and out to get a better idea of how money is really being spent. A budget identifies where the money is going and where ...
Cash management is the process of planning and controlling cash flows into and out of the business, cash flows within the business, and cash balances held by a business at a point in time (Pandey, 2004).
Efficient cash management involves the determination of the optimal cash to hold by considering the trade-off between the opportunity cost of holding too much cash and the trading cost of holding too little (Ross et al. , 2008) and as stressed by Atrill (2006), there is need for careful planning and monitoring of cash flows over time so as to determine the optimal cash to hold.
A study by Kwame(2007) established that the setting up of a cash balance policy ensures prudent cash budgeting and investment ofsurplus cash. This finding agree with the findings by Kotut(2003) who established that cash budgeting is useful in planning for shortage and surplus of cash and has an effect on the financial performance of the firms. The assertion by Ross et al. (2008) that reducing the time cash is tied up in the operating cycle improves a business’s profitability and market value furthers the significance of efficient cash management practices in improving business performance.
Provision of trade credit is normally used by businesses as a marketing strategy to expand or maintain sales (Pandey, 2004).
Efficient receivables management augmented by a shortened creditor’s collection period, low levels of bad debts and a sound credit policy often improves the businesses’ ability to attract new customers and accordingly increase financial performance hence the need for a sound credit policy that will ensure that SSEs’ value is optimized (Ross et al. 2008).
Costs of cash discounts, losses of bad debts and costs of managing credit and credit collections constitute the carrying costs associated with granting a credit which increase when the amount of receivables granted are increased. Lost sales resulting from not granting credit constitute the opportunity cost which decrease when the amounts of receivables are increased.
The Term Paper on Credit Card Business Internet Commerce
"The Evolution Of E-Business " The growth of the Internet in the past 10 years has been phenomenal. Companies large and small have embraced the Internet as a tool that can potentially expand their business beyond the traditional boundaries, which can give them a competitive advantage in the market place. The Internet and E-business websites seemed to many companies in the mid nineties as an ...
Firms that are efficient in receivables management should determine their optimal credit which minimizes the total costs of granting credit (Ross et al. , 2008).
As observed by Michalski (2007) in his study, an increase in the level of accounts receivables in a firm increases both the net working capital and the costs of holding and managing accounts receivables and both lead to a decrease in the value of the firm. A study by Lazaridis and Dimitrios (2005) found out that firms whoas
