Effect of Cash Management on the Financial Performance of Companies Listed at the Nairobi Securities Exchange

Abstract

Cash management is significant to both businesses and individuals because it entails the process of tracking income and expenses in ensuring enough cash is available in covering business needs. Study aimed at determining the effect of cash management on the financial performance of companies listed at the Nairobi Securities Exchange. Cash ratio and current ratio parameterized cash management while corporate governance, size and capital structure were control variables with return on assets assessing financial performance. Researcher utilized secondary data with a five-year period being the researcher’s target covering 2019 to 2023. Descriptive design was integral in this analysis because it provided elaborate information on study variables. R square disclosed that independent variables examined described variations of 0.156 in financial performance. This suggests that, model’s external variables account for 84.4% of variance in financial performance, while five variables assessed contribute 15.6% of the variance. Analysis of Variance concluded p= 0.000, which is significant giving an impression that the model was relevant in making research conclusions. It was established further that, current ratio is positively linked to financial performance with significant influence (β=0.0134, p=0.004). Cash ratio is positively linked to financial performance with insignificant influence (β=0.0054, p=0.259). Corporate governance is negatively linked to financial performance with significant influence (β=-0.0296, p=0.000). Size is negatively linked to financial performance with significant influence (β=-0.0075, p=0.000). Research recommends organizations to ensure optimal current ratio is maintained within the desired range to ensure operational efficiency and liquidity is maintained. Further, organizations must establish guidelines pertaining utilization of cash. This entails cash withdrawals limits, assets purchase on cash basis conditions, guidelines on the reinvestment of any excess cash with an objective of improving financial performance.