| dc.description.abstract | This study was undertaken to investigate the effects of working capital management on profitability of tea companies in Meru County. It investigated all the seven incorporated manufacturing companies located within Meru County. The study was based on specific objectives which were to establish the effects of cash conversion cycle, number of days accounts receivable , inventory conversion period and the number of days accounts payable who might want to extend this work, the business managers, investors scholars and competitors. The study was, to a greater extent guided by the Fisher's separation theory and the cash conversion theory. Several literature's relevant to this study were reviewed with a view of isolating research gaps. The study used descriptive research design as this is an effective tool for application of cause-effect statistical methods such as regression analysis. For this purpose, the multiple linear regression analysis was used to describe the nature of the relationship between working capital parameters and the profitability of the company. The regression analysis was based on a five year period starting from year ended 2009 to the year ended 2013. Twenty one respondents formed the target population.Census method was used to study the respondents as the population was considered small. The study used questionnaires to collect primary data from the population. This data were analyzed and tested by use of Pearson's correlation coefficient and ANOVA to confirm or reject the hypotheses. It was found that the net cash conversion cycle, days account receivable and the inventory conversion period each had negative effect on the profitability. This implies that shortening these duration's improves profitability. Conversely, the number of days account payable had a positive effect on profitability.This later finding could be so because delaying payment to suppliers gives the paying firm an opportunity to invest the money in the short run to generate additional returns. There is need therefore for the finance managers to shorten the net cash conversion cycle,the days account receivables and the inventory conversion period to increase the profitability. Further, managers need to delay making payment to creditors in order to increase profitability. The research established that the profitability of the tea factories in Meru County has remained very low in the last five years. Other than the four working capital parameters covered by this study, there could be other independent variables affecting the profitability of the tea sector in Meru County. The researcher therefore recommends a further study to find out the causes of low profitability of tea factories in Meru County. | en_US |
