The Effects of Working Capital Management Approaches on the Financial Performance of Agricultural Companies Listed at the Nairobi Securities Exchange, Kenya

Working capital management approach is one of the most important strategies that company managers consider for effective financial management. This is because a firm’s profitability depends on the working capital management approach adopted. This study examined the relationship between working capital management approaches and financial performance of agricultural firms listed in the Kenya’s Nairobi Securities Exchange (NSE) using a diagnostic research design. The results showed that each company employed a significantly different working capital management approach (P = 0.002, F = 54.55, df = 6). However, significant effects of the working capital management approach on the company’s financial performance was only evident in the Sasini Tea and Coffee Limited Ltd. (F = 21.64, P = 0.002, df = 6). The financial performance estimates between the companies also differed significantly (P = 0.0005, F = 5.96, df = 6) probably due to different proportion of total assets. The Limuru Tea Ltd was the most profitable company (Return on Asset: ROA = 46.48%) while Eagards Ltd. was the least profitable (ROA = 4%). The working capital management approaches were less than 50% in all companies suggesting that the companies used different levels of conservative working capital management approaches. None-listed agricultural companies should be studied to derive more conclusive remarks on the effects of working capital management approaches on agricultural companies in Kenya.