The Relationship Between Working Capital Management and Financial Perfomance of Private Hospitals in Kenya

Abstract

The study looked into the effect of working capital management on the profitability of private hospitals in Kenya. The data analysis was carried on 10 private hospitals for a period of 10 years between 2003 and 2012. The relationship of average collection period, inventory conversion period and average payment period with return on assets employed was analyzed in this study. The study applied correlation analysis and group wise weighted least squares regression analysis to identify the effects of these variables on profitability. The correlation analysis shows that the hospitals' profitability is influenced by the variables relating to working capital. There is a positive relationship between profitability and Average collection period and inventory conversion period. Average payment period shows a negative relationship with profitability.