The relationship between financial planning and financial performance of cement manufacturing firms in Kenya

Abstract

The study analyzed the relationship between financial planning and financial performance of cement manufacturing firms in Kenya. A census approach was used to study the relationship in all the six cement manufacturing firms in Kenya. The instrument of data collection was a semi-structured questionnaire having both open and close-ended questions. Data on the financial performance was gathered from past records and audited financial statements of the manufacturing firms. Secondary data was collected from audited financial statements of all the cement manufacturing firms in Kenya for the years in consideration. The study covered a five year period. Data was analyzed to establish the measures of central tendency that include the mean, mode, and median highlighting the key findings. Inferential statistics was used to establish the relationship between the variables of the study and qualitatively by content analysis. Analysis of variance (ANOVA) was used to determine the significant relationship, if any, of the variables. The study used regression analysis to determine the extent to which financial planning practices affects the financial performance of cement manufacturing firms. Findings of the study overwhelmingly support the hypothesis that financial planning practices play a big role in implementing most organizational policies. The failure of a firm to implement financial planning activities and business planning activities seemed to inhibit many of the cement manufacturing firms from making expected profits. Results also revealed that financial planning activities, business planning activities and frequency of financial planning techniques are the key factors that influence how well the company will perform in the industry. Factors like risk management practices, employee turnover, tax planning, contingency plans, monitoring the lead time, preserving excess stocks, monitoring stock levels, avoiding stock out costs, setting profits target periodically and minimizing holding costs came out to significantly influence the financial performance of a firm