Effect of liquidity management on profitability of cement manufacturing firms in Kenya

Abstract

Liquidity management describes the effort of the investors or managers to reduce liquidity risk exposure to enhance profitability of the firm. This study was carried out on the effect of liquidity management on profitability of cement manufacturing firms in Kenya. A descriptive approach was used in trying to establish the relationship between liquidity management on profitability of cement manufacturing firms. The study adopted a descriptive approach in trying to find out the effect of liquidity management on the profitability of cement manufacturing firms in Kenya. The study did a census survey since it involved all the seven cement manufacturing firms in Kenya. Data was obtained from secondary sources; financial statements. The collected data was analyzed using SPSS and presented in tables. The results of the regression analysis showed that there was a significant relationship between the relationship between liquidity management and profitability. Correlation analysis also shows a moderate positive relationship between liquidity management and profitability. The limitation of this study was that the annual financial statements are prepared under the fundamental assumptions and concepts which are subjective and therefore they are not be uniformly applied especially in terms of provisions and estimates. The study recommends for a comparative study that can be carried out to establish whether liquidity management affects profitability in other sectors like the public sector.