Record Details

LIQUIDITY MANAGEMENT AND THE SUGARCANE OUTGROWER COMPANIES IN KENYA

European Journal of Economic and Financial Research

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Title LIQUIDITY MANAGEMENT AND THE SUGARCANE OUTGROWER COMPANIES IN KENYA
 
Creator Zainabu, Kanyange
Wanjare, Joshua
Kirui, Gideon
 
Subject cash conversion cycle, liquidity management, working capital, sugarcane out-grower companies
 
Description Decisions about how much to invest in the customer and inventory accounts, and how much credit to accept from suppliers, are reflected in a firm’s cash conversion cycle. Some previous studies have used this measure to analyze whether shortening the cash conversion cycle has positive or negative effects on the firm’s profitability. These previous studies have focused their analysis on large firms. This study contributes to literature by focusing on the small and medium-sized organizations like the sugar-cane out-grower companies in Kenya whose unique characteristics include very high levels of current assets, fewer alternative sources of external finance and dependency on short-term finance. Using a descriptive cross-sectional research design, a total of 30 managerial staff members from the ten out-grower companies in Kenya were surveyed by way of completing a semi-structured questionnaire. Secondary data was also collected to supplement the primary data. The study established that the collection period for the receivables is considerably very long due to the long waiting period before cane proceeds are received by the farmers from the factories. The study also found out that over 78% of the out-grower companies settle their trade payables within 60 or less days. Low bargaining power by the out-grower firms vis-à-vis the suppliers was blamed for the short payables deferral period. The study further established that more than 67% of the out-grower companies hold their inventories for more than 60 days before converting them into receivables due to large order sizes targeting economies of scale and bulk discounts. Lack of appropriate skills has also hindered the use of techniques like just-in-time (JIT) for efficient inventory management.JEL: M10, D22, D24  Article visualizations:
 
Publisher European Journal of Economic and Financial Research
 
Contributor —
 
Date 2018-02-25
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
—
 
Format application/pdf
 
Identifier https://oapub.org/soc/index.php/EJEFR/article/view/327
 
Source European Journal of Economic and Financial Research; Volume 3, Issue 1, 2018
2501 - 3430
2501 - 9430
 
Language eng
 
Relation https://oapub.org/soc/index.php/EJEFR/article/view/327/906
 
Rights Copyright (c) 2018 Kanyange Zainabu, Joshua Wanjare, Gideon Kirui
http://creativecommons.org/licenses/by/4.0