Financial Management And Financial Performance Of Firms Listed Under Manufacturing And Allied Sector At The Nairobi Securities Exchange, Kenya.

ABSTRACT

The success of any organization depend on sound financial management, some of the major financial management practices that determines the success or failure of an organization are: The level of working capital investment which focus on maintaining an efficient level of current assets and current liabilities, Investment decisions that guides the amount of Capital required and the project(s) to invest in, and the financing decisions which determines the capital structure of the organization and the choice of the sources of those funds. The general objective of this study was to determine the effect of financial management on the financial performance of firms listed under manufacturing and allied sector at the Nairobi securities exchange, Kenya. This study was guided by the following specific objectives: To determine the effects of working capital investment, capital structure and capital investment on financial performance of firms listed under the manufacturing and allied sector at the Nairobi Securities Exchange, Kenya. Data was analyzed using descriptive analysis and panel regression analysis. The target population of interest in this study constituted all companies listed under manufacturing and allied at the NSE for the period of five years from 2011 to 2016. The study used both primary and secondary data. The study found that working capital and capital structure and capital investment had a positive and significant effect on the financial performance of manufacturing and allied sector at NSE. The study concluded that working capital is important to the financial performance of manufacturing and allied sector at NSE because the current assets of a typical manufacturing firm accounts for over half of its total assets. Capital structure was concluded that it provides an organized way for the manufacturing and allied sector to raise capital and also provides flexibility in raising funds. The study concluded that through capital investment, firms in the manufacturing and allied sector at NSE invest to acquire capital assets in order to generate benefits over a series of years in future. On working capital, the study recommended that manufacturing and allied sector listed at NSE should increase their average collection period, inventory turnover periods and cash conversion period in order to improve their financial performance. On capital structure, the study recommended that manufacturing and allied sector listed at NSE should use shareholders’ funds as much as possible before they undertake to borrow, so that they minimize the risks related to borrowing, which include interest on the debt exceeding the return on the assets they are financing and on capital investment, the study recommended that manufacturing and allied sector listed at NSE should pursue product diversification investment strategies in order to broaden their revenue base.