International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue XII, December 2020 | ISSN 2454–6186

Effect of Working Capital Management on Performance of Commercial SMEs in Mombasa County, Kenya

Ibrahim Makina¹, Robert Kenga’ra^2
1Phd candidate Kisii University Kenya
²Kisii University Kenya

Abstract:- This study aimed at establishing the effect of working capital management on performance of commercial SMEs in Mombasa Kenya. Specific objectives were; to evaluate the influence of the optimum inventory management on performance of commercial SMEs in Mombasa county, to assess the effect of cash conversion cycle on performance of commercial SME’s in Mombasa County and to determine the effect of debtors management on performance of commercial SMEs in Mombasa County. The study employed descriptive survey research design. A population of 70 respondents was drawn from all the six sub-counties. Data was collected through questionnaires and interviews. Collected data was analyzed using multiple-regression analysis. Inferential statistics was used to determine the relationship between variables. It was revealed that there was a positive correlation between inventory management, cash conversion cycle and debts management and performance of commercial SMEs in Mombasa County. This study is important for the policy makers to come up with the strategies on how to better SMEs businesses.

1.1 Background of the Study

In basic terminology terms, working capital is the difference between current assets and current liabilities. Current assets constitute cash, receivables and inventory and are managed closely on a daily basis for a whole financial year whereby the mix must be optimal. Current liabilities are defined as claims against the business by third parties such as suppliers of goods, services and lenders of short term cash and other financial instruments. Proper turnover decision making for any organization with a working capital to realize targeted profit is usually a challenge to financial managers. An organization with a strong projection of finance in the long run will have problems in managing the working capital (Ha, Thanh & Hang 2016).