DEDICATION ABSTRACT HYPERLINK l _Toc515283594 ABBREVIATIONS AND ACRONYMS PAGEREF _Toc515283594 h v HYPERLINK l _Toc515283595 OPERATIONAL DEFINITION OF TERMS PAGEREF _Toc515283595 h vi HYPERLINK l _Toc515283596 CHAPTER ONE INTRODUCTION PAGEREF _Toc515283596 h 1 HYPERLINK l _Toc515283598 1

DEDICATION ABSTRACT HYPERLINK l _Toc515283594 ABBREVIATIONS AND ACRONYMS PAGEREF _Toc515283594 h v HYPERLINK l _Toc515283595 OPERATIONAL DEFINITION OF TERMS PAGEREF _Toc515283595 h vi HYPERLINK l _Toc515283596 CHAPTER ONE INTRODUCTION PAGEREF _Toc515283596 h 1 HYPERLINK l _Toc515283598 1.1 Background of the Study PAGEREF _Toc515283598 h 1 HYPERLINK l _Toc515283599 1.3 Objectives of the Study PAGEREF _Toc515283599 h 7 HYPERLINK l _Toc515283600 1.3.1 General Objective PAGEREF _Toc515283600 h 7 HYPERLINK l _Toc515283601 1.3.2 Specific Objectives PAGEREF _Toc515283601 h 7 HYPERLINK l _Toc515283602 1.4 Research Questions PAGEREF _Toc515283602 h 8 HYPERLINK l _Toc515283603 1.5 Significance of the Study PAGEREF _Toc515283603 h 8 HYPERLINK l _Toc515283605 1.6 Scope of the Study PAGEREF _Toc515283605 h 9 HYPERLINK l _Toc515283606 1.7 Limitations of the Study PAGEREF _Toc515283606 h 9 HYPERLINK l _Toc515283607 1.8 Chapter Summary PAGEREF _Toc515283607 h 9 HYPERLINK l _Toc515283609 CHAPTER TWO LITERATURE REVIEW PAGEREF _Toc515283609 h 11 HYPERLINK l _Toc515283611 2.1 Introduction PAGEREF _Toc515283611 h 11 HYPERLINK l _Toc515283612 2.2 Theoretical Literature Review PAGEREF _Toc515283612 h 11 HYPERLINK l _Toc515283613 2.2.1 Finance Theory PAGEREF _Toc515283613 h 11 HYPERLINK l _Toc515283614 2.2.2 Liquidity Theory PAGEREF _Toc515283614 h 12 HYPERLINK l _Toc515283615 2.2.3 Corporate Risk Management Theory PAGEREF _Toc515283615 h 13 HYPERLINK l _Toc515283616 2.3 Empirical Review PAGEREF _Toc515283616 h 14 HYPERLINK l _Toc515283617 2.3.1 Influence of accounts receivable period on profitability of SMEs PAGEREF _Toc515283617 h 14 HYPERLINK l _Toc515283618 2.3.2 Influence of inventory holding period on profitability of SMEs PAGEREF _Toc515283618 h 16 HYPERLINK l _Toc515283619 2.3.3 Influence of accounts payable on profitability of SMEs PAGEREF _Toc515283619 h 18 HYPERLINK l _Toc515283620 2.3.4 Influence of cash conversion cycle on profitability of SMEs PAGEREF _Toc515283620 h 19 HYPERLINK l _Toc515283621 2.4 Conceptual Framework PAGEREF _Toc515283621 h 21 HYPERLINK l _Toc515283622 2.5 Summary of literature review and Research Gaps PAGEREF _Toc515283622 h 22 HYPERLINK l _Toc515283623 2.6 Chapter Summary PAGEREF _Toc515283623 h 22 HYPERLINK l _Toc515283624 CHAPTER THREE RESEARCH METHODOLOGY PAGEREF _Toc515283624 h 23 HYPERLINK l _Toc515283626 3.1 Introduction PAGEREF _Toc515283626 h 23 HYPERLINK l _Toc515283627 3.2 Research design PAGEREF _Toc515283627 h 23 HYPERLINK l _Toc515283628 3.3 Target population PAGEREF _Toc515283628 h 23 HYPERLINK l _Toc515283629 3.4 Sampling design and sample size PAGEREF _Toc515283629 h 24 HYPERLINK l _Toc515283630 3.5 Data collection PAGEREF _Toc515283630 h 24 HYPERLINK l _Toc515283631 3.5.1 Data collection instruments and procedures PAGEREF _Toc515283631 h 24 HYPERLINK l _Toc515283632 3.5.2 Pilot study PAGEREF _Toc515283632 h 25 HYPERLINK l _Toc515283633 3.5.3 Validity of Data Collection Instrument PAGEREF _Toc515283633 h 25 HYPERLINK l _Toc515283634 3.5.4 Reliability of Data Collection Instruments PAGEREF _Toc515283634 h 25 HYPERLINK l _Toc515283636 3.6 Data analysis and Presentation PAGEREF _Toc515283636 h 26 HYPERLINK l _Toc515283637 3.7 Ethical Considerations PAGEREF _Toc515283637 h 27 HYPERLINK l _Toc515283638 3.8 Chapter Summary PAGEREF _Toc515283638 h 27 HYPERLINK l _Toc515283639 REFERENCES PAGEREF _Toc515283639 h 28 ABBREVIATIONS AND ACRONYMS AIM Alternative Investment Market APP Accounts payable period ARP Accounts receivable period ASE Athens Stock Exchange CCC Cash conversion cycle CRMT Corporate Risk Management Theory EBIT Earnings before Interest and taxes FT Finance Theory GDP Gross Domestic Product GoK Government of Kenya IHP Inventory holding period IMF International Monetary Fund KNBS Kenya National Bureau of Statistics LT Liquidity Theory MoE Margin of error MSMEs Micro, Small and Medium Enterprises ROA Return on Assets RoK Republic of Kenya SMEs Small and Medium Enterprises WCM working capital management OPERATIONAL DEFINITION OF TERMS Accounts Payable Period This is the average time it takes firms to pay suppliers. Accounts Receivable Period This is the average number of days that a firm takes to collect payments from its customers. Cash Conversion Cycle Refers to the amount of time that elapses from the point when the firm makes a cash outlay to purchase raw materials to the point when cash is collected from the sale of finished goods produced using those raw materials. Inventory period This is the average number of days of stock held by the firm. Profitability This is measured by Return on Assets ratio which measures a Companys Earnings before Interest and taxes (EBIT) against its total net assets. Small and Medium Enterprises (SMEs) This is considered as a small business as that with 10-99 employees as well as using the annual turnover and the annual balance sheet after all rebates have been paid out (GoK, 2007). Working capital management Refers to the management of current assets and current liabilities of a firm to meet its short term liquidity needs. Working capital Refers to that part of firms capital which is held in current assets such as cash, receivables, inventory and marketable securities. CHAPTER ONE INTRODUCTION This chapter aims at providing sufficient information for better understanding of the study. It examines the global context and then narrows down to the issues that the study will address. The chapter provides the background information, statement of the problem, research objectives and research questions that underpin the study, significance, scope and limitations of the study. 1.1 Background of the Study The importance and contribution of small and micro enterprises (SMEs) to achieving macroeconomic goals of nations, especially in developing nations, has attracted the attention of scholars in the entrepreneurship discipline in recent years (Shelley, 2004). A complex global environment in which SMEs survive, grow and thrive is, therefore, considered an important objective of policy makers in both developed and emerging economies around the world. SMEs are generally known for their labor intensive activities and also for their use of local resources. Support for SMEs is a common theme because it is recognized that SMEs contribute to the national and international economic growth. According to the SMEs Baseline Survey (GoK, 1999), the sector employed 2.4 million persons. This increased to 5.1 million persons in 2002 as per the 2003 Economic Survey and translates to 675,000 jobs per year. The level of employment within SMEs in 2002 accounted for over 74.2 of the total number of persons engaged in the country. This is evidence that, with proper development strategies, the sector is capable of providing and surpassing the governments target of creating 500,000 jobs per year. Small enterprise baseline survey Central Bureau of Statistics (Central Bureau of Statistics, 2004) also indicates that there is high rate of failure and stagnation among many start-up businesses. The survey reveals that only 38 of the businesses are expanding while 58 have not added workers. According to the survey, more enterprises are most likely to close in their first three years of operation. This is confirmed by the recent study conducted by the Institute of Development Studies (RoK, 2008) University of Nairobi which used a sample of businesses operating in Central Kenya. This study revealed that 57 of small businesses are in stagnation with only 33 of them showing some level of growth. According to Kenya Economic Survey (RoK, 2008) , out of the total 543.3 new jobs created in Kenya in the year 2009, SMEs created 426.9 of them. This was 89.9 of the total new jobs created in Kenya that year. In the same year, the sector contributed KSh. 806,170 million of GDP which is 59 percent of total Gross Domestic Product (RoK, 2009). The Kenya economic survey (2010) notes that this same sector generated 390.4 thousand new jobs which translated into 87.6 percent of the total jobs generated in 2009. Most countries, Kenya included, cluster small and medium enterprises based on employment (Sessional Paper No. 2, 1992). Sessional Paper No. 2 of 1992 and national baseline survey (1999), cluster enterprises in the following order micro enterprises- 1-9 employees, small enterprises 10-49 employees medium enterprises 50-99 employees, large enterprises -100 and above (RoK, 1992). According to the Economic Survey (RoK, 2012), the SME sector contributed 79.8 of new jobs created in the year 2011 in Kenya. Consequently, the Kenyas development plans for the 1989-1993 1994-1996 and 1997-2001 periods put special emphasis on the contribution of small and medium size enterprises in the creation of employment in the country (RoK, 1989 RoK, 1994 Rok, 1999). Job creation in this sector went up by 5.1 percent in 2011. Analysis by province shows that Nairobi County recorded a 5.4 increase (RoK, 2012). According to the sessional paper No.2 of (2005), SMEs have high mortality rates with most of them not surviving to see beyond their third anniversaries. This indicates that SMEs have inherent problems either in their internal environment or from the external environment that makes them fail. Over the years, SMEs development has emerged a major economic development and growth strategy aimed at in poverty alleviation, wealth and employment creation in many world economies. As a result, many governments world-wide with support from sectoral partners have continued to initiate programs earmarked towards the strengthening and development of the sector (Okech, 2006). Areas of support include management and technical training, extension services, provision of physical structures, provision of lack and utilities, marketing and credit facilities (Okech 2006 GoK, 2010). Aware of this, the Kenyan government has taken steps to develop a legal, and regulatory framework, markets and marketing, business linkages, the tax regime, skills and technology and financial services (GoK, 2005 GoK, 2010). Various definitions have applied by various stakeholders with reference to SMEs. For instance, while Sessional Paper No. 2 of 2005 defines a SME as an enterprise with between 1 to 50 employees, the World Bank uses various criteria to define SME. These include a formally registered business with an annual turnover of between Ksh. 8 – 100 million or with an asset base of at least Kenya Shillings 4 million or employing between 5 – 150 employees. The small business sector as a major source of employment and income is argued to be even more important to the economies in developing countries. In Africa, about 25 percent of the people employed outside agriculture depend on this sector for their livelihood improving the conditions for small business is thus seen as a solution to unemployment and poverty alleviation (Mead Liedholm, 1998). According to Haftendorn and Salzano (2003), micro and small enterprise creation are routes that young people actively explore to ark their current and future economic needs. In Kenya, the sector contributed over 50 of new jobs created in 2005 and contributed estimated 18 per cent of GDP, up from 3 per cent in 2010 (GoK, 2012). The Government of Kenya in Kenyas blue-print of 2010 acknowledged Kenya to move towards a newly-industrialized middle-income country capable of providing a high quality of life for all its citizens by the year 2030, SMEs need to be strengthened (GoK, 2010). Despite the significant contribution and support earmarked towards the sector, SMEs are faced with the threat of failure with past statistics indicating that three out of five fail within the first few months (Sonia, 2009). According to Sonia, working capital management accounts for most of the failures in these enterprises. The extensive literature on the subject reveals the component of working capital consisting of current assets and current liabilities. The need to main effective working capital management within small and medium enterprises remains pivotal to solvency and liquidity of SMEs (Peterson, 2012). Most SMEs do not care about their working capital position, most have only little regard for their working capital position and most do not even have standard credit policy. Many do not care about their financial position, they only run business and they most focus on cash receipt and what their bank position is (Sunday, 2011). For the viability of the SMEs, Banos (2010) observed that efficiency in the management of working capital is critical. This according to Banos will enhance performance of the SMEs as well their sustainability and competitiveness. They noted that their viability will depend to a greater extent, on the ability of the enterprises to effectively manage receivables, inventory and payables (Bano et al., 2010). The goal of working capital management is to ensure that affirm is able to continue its operations and that it has manage its short term obligations when they occur. According to Peterson (2012), however, most SMEs fail to maintain necessary financial transactions which in the process affect their working capital and hence encounter cash flow problems. There often exists a mismatch between cash inflows and cash outflows during operating activities in SMEs. To control these cash flows and thereby reduce the potential negative effects on profitability and risk, it is important that working capital management is applied. This is important because SMEs have more volatile cash flows, are less liquid, are more dependent on short term financing and are faced with higher portions of current assets compared to large companies (Ross, Westfield and Jaffe (2005). In Peel and Wilson (1996) it was reiterated that small and medium enterprises should adopt formal working capital management routines in order to reduce the probability of business closure, as well as to enhance business performance. They contended that managers and entrepreneurs of these enterprises should understand the importance of working capital management for the liquidity, profitability and ultimately the survival of their company. In Africa, Mennah and Fouad (2013) examined factors affecting the performance of SMEs in the manufacturing sector of Cairo, Egypt. The aim of this study is to explore the obstacles facing the small and medium enterprises (SMEs) in the context of the manufacturing sector of Cairo, Egypt using a sample of 50 SMEs and the factors examined were human resources, financial management, general management, production management and marketing management. Owoetoni, Amuche and Utomi (2015) assessed the impact of working capital management on profitability of SMEs in Kaduna Metropolis, Nigeria. The independent variables in the study were short term assets, namely cash and accounts receivables, and liabilities, leaving out inventory management and cash conversion cycle. Dinku (2013), analyzed the impact of working capital management on profitability of micro and small enterprises in Ethiopia, focusing on Bahir Dar City Administration. Besides failure to examine the relationship between the independent variable, cash management practices and the dependent variable, profitability, the study location was also different. Lakew and Rao (2015) examined the effect of financial management practices and characteristics on profitability of business enterprises in Jimma town, Ethiopia. Besides the difference in study location and the various components of financial management practices, the population of study were business enterprises, which did not have necessarily to be SMEs. Mutoko (2014) studied the challenges of access to markets and opportunities for SMEs in Botswana. The challenges under focus were lack of or limited access to markets, financial inadequacies, limited management skills, poor work ethics and lack of competitiveness. In addition, the study location was different from the current study. Hamza, Mutala and Antwi (2015), undertook an assessment of cash management practices and their effects on financial performance of SMEs in northern region of Ghana, while Attom (2015) studied cash management practices by micro and small-scale Enterprises at Kasoa in the central region of Ghana. Besides the difference in location of the two studies, the focus was only cash management, which is only one of the variables of working capital management practices while the other three, namely cash conversion cycle, accounts receivables management, and inventory days were left out. In addition, the studies did not seek to examine the relationship between the independent variable, cash management practices and the dependent variable, profitability. Agyei-Mensah (2012), analyzed working capital management practices of SMEs in Ashanti region, Ghana. Besides failure to establish the link between working capital management practices and profitability of SMEs, the study location was different. Marfo-Yiadom and Agyei (2013) studied working capital management practices of small scale enterprises in the central region of Ghana. The only independent variable under study was credit management, which was not linked to performance of the SMEs. However, there are a few studies with reference to Kenya on working capital management and firm profitability, especially in the manufacturing construction sector. For example, Mathuva (2010) focused on the influence of working capital management on corporate profitability of firms listed at the Nairobi Securities Exchange. Gakure, Cheluget, Onyango and Keraro (2012) on the other hand, analyzed the relationship between working capital management and performance of 15 manufacturing firms listed at the Nairobi Securities Exchange for a period of five years from 2006 to 2010. Ndagijimana and Okech (2014) undertook an assessment of determinants of working capital management practices in SMEs in Nairobi, with a focus on how the management of accounts receivables and payables, and the cash conversion cycles affect working capital management practice in these enterprises. Besides inability to seek to examine relationship between the independent variables with dependent variable, profitability. Nyangau (2013), examined challenges facing SMEs in inventory management in Kisii Town, Kenya. The study not only failed to take into account other working capital management components, namely cash conversion cycle, accounts receivables management and accounts payables management, but did also not link the independent variable to the dependent variable, profitability. The study locations were also different. Nthenge and Ringera (2017) examined the effect of financial management practices on financial performance of SMEs in Kiambu Town, Kenya. The study sought to examine the relationship between three independent variables namely, working capital management, investment decisions and financing decisions and the dependent variable, performance, which are all different from the variables used in the current study. Wambugu (2013) assessed the effects of working capital management practices on profitability of SMEs in Nairobi, Kenya. The variables under study were cash conversion cycle, inventory holding period, accounts receivables period and accounts payables period. Nyakundi, Ombuki, Evusa and Ariemba (2016), examined the influence of working capital management practices on financial performance of SMEs in Machakos Sub-County, Kenya. The independent study variables were cash management, accounts receivables and inventory, leaving out cash conversion cycle, which is a key variable in the current study. In addition, besides the difference in study location, the independent variable, the measure of performance was growth of the SMEs and not profitability. Kiprotich, Kimosop, Sarmwei and Abalo (2015), undertook an assessment of the performance of working capital management practices on small and medium enterprises in Eldoret Municipality. Despite the study having been undertaken in Eldoret, which is the location of the current study, the population of study was all SMEs and not just those in the manufacturing sector. In addition, the independent variables of the study were inventory and trade credit management only, while performance measure was return on assets and not profitability, hence the difference from the current study. However, these studies provide no evidence on the relationship between working capital management and profitability of manufacturing and construction firms in Kenya. In this context, the objective of the current study is to provide empirical evidences about the effect of working capital management on profitability for a sample of 10 manufacturing and construction companies during the period 20032013. While the study locations for the studies reviewed differed from the current study, none of the above mentioned studies focused on the influence of working capital management practices on profitability of on SMEs in the manufacturing sector in Eldoret town, Uasin Gishu County, Kenya, hence the impetus for this study. 1.3 Objectives of the Study 1.3.1 General Objective The aim of this research is to examine the influence of WCM practices on profitability of on SMEs in the manufacturing sector in Eldoret town, Uasin Gishu County, Kenya. 1.3.2 Specific Objectives The specific objectives listed below will guide the research To analyze the influence of accounts receivable period on profitability of SMEs in the manufacturing sector in Eldoret town, Uasin Gishu County, Kenya. To assess the influence of inventory holding period on profitability of SMEs in the manufacturing sector in Eldoret town, Uasin Gishu County, Kenya. To evaluate the influence of accounts payable period on profitability of SMEs in the manufacturing sector in Eldoret town, Uasin Gishu County, Kenya. To investigate the influence of cash conversion cycle on profitability of SMEs in the manufacturing sector in Eldoret town, Uasin Gishu County, Kenya. 1.4 Research Questions Answers will be sought to the research questions presented below. How does accounts receivable period influence profitability of SMEs in the manufacturing sector in Eldoret town, Uasin Gishu County, Kenya How does inventory holding period influence profitability of SMEs in the manufacturing sector in Eldoret town, Uasin Gishu County, Kenya How does accounts payable period influence profitability of SMEs in the manufacturing sector in Eldoret town, Uasin Gishu County, Kenya How does cash conversion cycle influence profitability of SMEs in the manufacturing sector in Eldoret town, Uasin Gishu County, Kenya 1.5 Significance of the Study It is hoped that results of this research will be of benefit to various stakeholders, who include the following Owners and managers of SMEs Owners and managers of SMEs will gain a clear understanding of the significance of effective management of working capital, and be able to make informed decisions regarding inventory levels, cash conversion cycle, accounts payable and accounts receivable period. The regulatory authorities of the Republic of Kenya The study will aid the policy makers and regulatory bodies make policy decisions regarding SMEs from a strategic not punitive point of view with the aim of promoting growth of SMEs. Other Researchers Findings of the research will provide clarification on the critical role that can be played by effective management of working capital in SMEs, and hopefully, contribute to the existing body of knowledge with respect to the link between WCM and profitability of SMEs. Findings of the research will stimulate the need for similar studies in other locations and settings. 1.6 Scope of the Study This research will only focus on registered SMEs in the manufacturing sector in Eldoret town, Uasin Gishu County, Kenya, whose number stood at 9,756 as at 30th December 2017 (Uasin Gishu County Ministry of Trade, 2017). The study will be carried out for a period of three months, May to July 2018 and the study respondents will be the SMEs owners or managers. 1.7 Limitations of the Study It is envisaged that various challenges will be faced in carrying out this study. They include the deliberate attempt by some of the sampled respondents to withhold information they may consider confidential. Confidentiality of the information provided will be key to countering this obstacle. The respondents will be assured that the single purpose of this research is to partially fulfill the academic requirements. There is also likelihood that bureaucracies will be encountered when seeking the necessary permissions to carry out the research from the various authorities. Permission will be sought from the University and Uasin Gishu County Ministry of Trade so as to avoid bureaucracy and facilitate smooth data collection process. The target groups that the study intends to focus on are usually very busy carrying out their duties and sometimes may not be available to participate in the study promptly. The researcher will exercise utmost patience and wait till when it will be convenient for the target groups to participate in the study. 1.8 Chapter Summary Chapter one has covered the study background, description of the research problem, study objectives and questions to be answers. Significance and scope of the research have also been covered, in addition to the study limitations and operational definition of terms. Desk study will be presented in the next chapter, chapter three will present the research design and methodology, analysis and results of the research will be discussed in chapter four, while chapter five will present the study summary, discussions, conclusions and recommendations. CHAPTER TWO LITERATURE REVIEW 2.1 Introduction This chapter presents literature review, which covers the theoretical, empirical review, research gaps and the conceptual framework of the research. The purpose of the review was to avoid duplicating researches that have previously been undertaken and sources of information include original, recent and authoritative books, journals and dissertations. 2.2 Theoretical Literature Review The previous section provided a brief introduction of this chapter. This section discusses the theoretical framework that is used in this study and covers the theories in which the study is grounded on and relevant within cattle rustling context. Theoretical framework is a collection of interrelated concepts aimed at providing guidance to research work as it determines the items for measurement and the statistical relationships being studied (Kotler Keller, 2006). The study is anchored on three theories, namely (1) Finance Theory (FT), Liquidity Theory (LT), and Corporate Risk Management Theory (CRMT). These theories are briefly discussed below. 2.2.1 Finance Theory Finance theory is made up of three main threads, namely WCM, capital structure and capital budgeting (Aksoy, 2005). Whereas capital structure and capital budgeting have a close relationship with financing and managing long-term investments, financing decisions related to working capital have a close relationship with financing and management of short-term investments that involve both current liabilities and current assets. Horne and Wachowitz (2004), WCM efficiency is of importance, especially in production firms, whose assets mostly comprise current assets, as it has a direct effect on profitability and liquidity of any firm. Kargar and Bluementhal (1994) observed that bankruptcy may occur in firms that use inaccurate WCM practices despite their profitability being constantly positive. There is thus need to avoid dependency on optimal working capital level by placing emphasis on profit maximization, or just in direct contradiction, to focus only on liquidity and consequently pass over profitability. Whereas excesses in working capital can result in a substandard return on assets, inconsiderable amount of it may incur shortages and difficulties in maintaining day-to-day operations. Working capital is also a major external source of capital especially for small and medium sized and high growth firms. These firms have relatively limited access to capital markets and tend to overcome this complication by short-term borrowing. Working capital position of such firms is not only an internal firm-specific matter, but also an important indicator of risk for creditors. Higher amount of working capital enables a firm to meet its short-term obligations easier. This results to increased borrowing capability and decrease in default risk and consequential decrease in cost of capital and increase in firm value. Therefore, efficiency in working capital management affects not only short-term financial performance in terms of profitability, but also long-term financial performance, i.e., firm value maximization (Moyer et al., 1992). 2.2.2 Liquidity Theory According to Jose (1996), liquidity theory as a function of current assets and current liabilities is an important factor in determining working capital policies and indicates firms capability of generating cash in case of need. Current ratio, acid-test and cash ratios as traditional measures of liquidity are incompetent because these balance sheet based measures cannot provide detailed and accurate information about effectiveness of working capital management. Formulas used for calculating these ratios consider both liquid and operating assets in common. Besides, mentioned traditional ratios are also not meaningful in terms of cash flows (Richards and Laughlin, 1980). Boer (1999) has insisted on using ongoing liquidity measures in working capital management. Ongoing liquidity refers to the inflows and outflows of cash through the firm as the product acquisition, production, sales, payment and collection process takes place over time. As the firms ongoing liquidity is a function of its cash conversion cycle, it would be more appropriate and accurate to evaluate effectiveness of working capital management by cash conversion cycle, rather than traditional liquidity measures (Pinches, 1992). 2.2.3 Corporate Risk Management Theory The theory of corporate risk management holds that shareholders are better off if a firm maintains smooth cash flows (Minton, 1999). The theory advances the idea notion that smooth cash flows add value through reduction of an enterprises reliance external finance, which is costly. Empirically, it has been shown that cash flow volatility is costly as it affects a firms investment policy by increasing both the likelihood and the costs of raising external capital. While previous research finds that cash flow volatility is costly, no direct evidence exists linking financial statement volatility to firm value. Such a link is important because, in order for risk management to matter, smooth financials must be valued at a premium to more volatile ones. Investors value firms with smooth cash flows at a premium relative to firms with more volatile cash flows. Consistent with risk management theory, strong evidence shows that cash flow volatility is negatively related to proxies for firm value. There are a number of reasons why earnings volatility may matter to the firm independently of cash flow volatility. For instance, prior empirical work suggests that analysts tend to avoid covering firms with volatile earnings, as it increases the likelihood of forecast errors. Similarly, it is imperative that institutional investors avoid companies that experience large variations in earnings. High earnings volatility also increases the likelihood of negative earnings surprises. Managers have engaged in extensive earnings smoothing. It should be noted that earnings smoothing may likely reduce a companys perceived probability of default and therefore a firms borrowing costs. A firm may smooth earnings so as to reduce the informational advantage of informed investors over uninformed investors and, therefore, protect these investors who may need to trade for liquidity reasons. It has also been found that firms with greater earnings smoothing have a lower cost of capital even after accounting for cash flow volatility. Under certain specifications the market appears to punish firms for undertaking smoothing behavior preferring earnings volatility mirror cash flow volatility. These results are important and suggest managers focus their actions on smoothing cash flows rather than necessarily utilizing accruals to smooth earnings. There are a number of other ways in which financial uncertainty interacts with firm value. According to the CAPM, systematic risk should be negatively related to value, since higher discount rates yield a lower value, all things being equal. Further, recent empirical work suggests that not only does systematic risk affect value, but also idiosyncratic risk may be priced (Shin Stulz, 2000). Empirical evidence suggests that there is a negative relationship between systematic risk and firm value, as well as a negative and significant association between unsystematic risk and firm value. The two alternative types of risk, namely, cash flow and earnings volatility are of primary importance since unlike financial market variables they reflect the actual stability of the firms financial statements and are directly affected by managerial decisions and the firms risk management policies. 2.3 Empirical Review Working capital management practices and profitability of firms in various economic sectors have been a subject of study by many researchers, whose findings are quite mixed, with a majority of them concluding that there is an inverse relationship between the two variables. This section provides an overview of some of the researches with a view to assessing and identifying the research gaps, and is organized in accordance with the research objectives. 2.3.1 Influence of accounts receivable period on profitability of SMEs Pandey (2014) observed that credit provision is used by enterprises as marketing strategy in order to maintain or expand sales volumes. Efficiency in the management of accounts receivables augmented by shortened creditors collection period, low bad debt levels, and a sound credit policy enhances the ability of a business to attract new customers, and hence increase financial performance, which calls for the need to institutionalize a sound credit policy, which should lead to optimization of the value of SMEs (Ross et al., 2008). Costs incurred in credit management and collection, losses incurred due to bad debts, and costs incurred due to bad debts comprise of carrying costs associated with extension of credit, which increases with increase in amounts of receivables granted is increased. The reduced sales that result from extension of credit to customers comprise of the opportunity cost, which diminishes with an increase in receivables. Ross et al. (2008) concluded that firms that are effective efficient in the management of accounts receivables usually determine their optimal credit levels, which lead to minimization of total costs incurred in granting credit. Bagchi (2013), states that accounts receivables are a means of attracting customers and increasing sales for a business. This is because it allows a customer the privilege to access a service or a product and enjoy its consumption before delivering payment. This kind of arrangement will generally increase the sales but will have the additional effort of increase the receivables that the firm should recover later. If the firm does not collect its receivables, it risks turning it into bad debt, never to be repaid. In addition slow payment by the customers might end up running the business to the ground. Therefore to minimize this, the business sets up a credit sale policy. In general an increase in accounts receivable will raise current asset requirement. According to Deloof (2013) the managers can maximize the wealth of their shareholders by minimizing the accounts receivables period making an increase in inventory turnover. Deloof also observed a negative relation accounts receivables and profitability, which is consistent with the finding that firms with relatively less profitability have higher lead times for paying bills. Deloof (2003) using 1,009 non-financial corporate in Belgium established a significant negative relationship between accounts receivables, accounts payables and inventories periods on one hand and gross operating income on the other hand. Deloof suggests that in order for managers to increase the profitability they should therefore minimize the number of inventory turnover days and the accounts receivable collection days. Vural, Sokmen and Cetenak (2012) argued that a firms collection of receivables and CCC have a significant negative relationship with profitability and that if receivables collection period is shortened, hence reduction in CCC, profitability is likely to increase. The net effect is that there is an insignificant relationship between profitability and working capital components there is an inverse relationship between a firms leverage and profitability and a positive relationship between firm size and profitability. Michalski (2007) posit that an increase in a firms accounts receivables level leads to increase in net working capital and costs of holding and managing accounts receivables, which then lead to decreased value of the firm. Lazaridis and Dimitrios (2005), noted that firms that have a tendency of pursuing levels of accounts receivables to an optimal level increase their profitability, which result from an increase in market share and sales volumes. Juan and Martinez (2002) assert that firms have ability to enhance their value through reduction of accounts receivable period , which concur with findings by Deloof (2003) who posit that accounts receivables period has an inverse relationship with performance of firms. Sushma and Bhupesh (2007) assert that through putting in place a sound credit policy, effective debt collection procedures are not only ensured, but efficiency in the management of receivables is enhanced, hence improved firm performance. A study by Baveld (2012) on the relationship between accounts receivables duration and profitability among listed corporate in the public sector in the Netherlands in times of crisis and established a significant inverse relationship between accounts receivables and gross operating profit, which suggest that the relationship between accounts receivables and firms profitability is changed in times of a crisis in a way that some firms should not keep their accounts receivables at minimum in order to maximize profitability during crisis periods. 2.3.2 Influence of inventory holding period on profitability of SMEs Inventory constitutes a paramount portion of current asset management and its prudent management mitigates the risk of work or supply stoppages. Inventory ensures that the firm has excellent customer relations and this therefore ensures demand for the firms products leading to higher sales and increased profitability (Danuri Satoto, 2011). Inventory in accounting is an estimate of the appropriate monetary value of the goods to be held by a company. Raw material inventory is the free on board price that is paid during the time of the purchases, while finished goods is the value of the cost of sales or the cost of goods sold (Danuri Satoto, 2011). The inventory turnover period is a vital component of the current asset management. It indicates the approximate length of time it takes for products to be sold. A low frequency turnover generally implies a high investment in inventory. If the business is sub-optimal in maintaining products, this will result in financial resources being held captive in non-productive cases. Swaminathan (2001) examined the optimal inventory levels and established that adjustments on raw materials and finished goods as inventory component is faster than the inventory as a whole to reach the reasonable levels. Desk reviews reveal an inverse relationship between inventory conversion period and firm performance. According to Deloof (2003), reduction in inventory conversion period lead to an increase in stock out costs of inventory, leading to loss in sales opportunities, and hence poor performance. Lazaridis Dimitrios (2005) concluded that inventory levels should be kept at an optimal minimum level since mismanagement of inventory lead to tying up excess capital at the expense of profitable operations. Dimitrios (2008) posit that excessive inventory levels could demand more physical space, leading to financial distress, which increase possibility of inventories damages, deterioration, and hence losses. In addition, when large amounts of inventory are held, this is an indicator of careless and inefficient WCM practices. However, too little inventories lead to unnecessary interruptions of operations in the manufacturing sector, which increase possibility of loss in sales, and consequently, diminished firms profitability. According to Sople (2010), it is necessary to maintain appropriate levels of stock so as to ensure enhanced customer service levels. However, there is need for a trade-off between levels of inventory and customer responsiveness owing to the fact that high inventory costs lead to high costs. Chopra et al. (2007) observed that levels of stock include safety and cycle inventory carried out to satisfy demand for a certain period. Different firms put in place policies on replenishment with respect to how much and when to reorder, depending on uncertainty in supply and demand and desired levels desired. The replenishment policies may either be reviewed periodically or continuous. Periodic investment policies involve firms conducting regular periodic checks of their stocks in order to raise inventory to the levels desired. This research was premised on the assumption that SMEs are faced with a myriad of challenges in setting stock levels due to uncertainties in supply and demand, and the subsequent need of trade off between customer service and levels of stocks. Chopra et al. (2007) and Sople (2010) assert that existence of inventory in business is occasioned by a mismatch between supply and demand. Inventory may take the form of work in progress, finished goods or raw materials, and is thus of significance in anticipating future demands avoiding loss of sales. However, when decisions on how much and when to order so as to meet working capital requirements, customer demands, and profitability are of great significance. Sople and Chopra et al colluded that effective inventory management is about reduction in levels of inventory, costs reduction, improvements in operations, enhanced customer service levels and an improvement in profitability. A study by Singh (2008) on the link between inventory management and WCM established that exhibited poor inventory management practices experienced serious problems, which eventually destroyed their long-term profitability and negatively affected their survival chances. In addition, firms with effective inventory management practices reduced their inventories to optimum levels, which did not have adverse effects on production and sales volumes. The study concluded that inventory size has a direct influence on WCM. 2.3.3 Influence of accounts payable on profitability of SMEs A study of UK SMEs demand for credit by Wilson et al (1997), established that enterprises which honor their trade credit liabilities late do so when they reach their limit on short-term bank finance. Consequently, imposition of statutory interest significantly reduce the trade credit extended to SMEs may lead to adverse liquidity problems and increased failure rates unless alternative finance is readily available. Various suggestions have been made on how to solve the problem of late payment. For instance, it has been argued that credit management is an area that has been neglected, which lead to increased failure rates of firms, unless alternative finance is readily available. Wilson et al posit that poor credit management practices are the cause of late payment. Deloof (2003) undertook an analysis of 1,009 large non-financial firms in Belgium and established that owners/managers can increase firms profitability by making a reduction on accounts receivables and inventories periods. Deloof assert that less profitable firms have a tendency of stretching their accounts payable durations. Nobanee and AlHajjar (2009b) undertook an analysis of 2,123 non-financial corporate listed on the Tokyo Stock Exchange, Japan between 1990-2004 and arrived at the conclusion that firms can increase their profitability through shortening the CCCs, accounts receivables and inventory conversion periods. Nobanee and AlHajjar also established that extension of accounts payables deferral period could increase profitability but concluded that the managers ought to exercise great care because extension of accounts payables deferral period could damage the firms credit reputation and hence negatively affect the firms profitability in the long run. Delays in payments to suppliers allow firms to make an assessment of the quality of products that were purchased and can be inexpensive and flexible sources of financing. However, Falope Ajilore (2009) argued that it should be borne in mind that late payment may have a very high implicit costs there is availability of early payment discounts. In addition, the more money locked up in working capital, the greater the investment in current assets, and the lower the risk but also the lower the profitability obtained. 2.3.4 Influence of cash conversion cycle on profitability of SMEs Cash conversion cycle (CCC) presents the time period between disbursement and collection of cash, simply described as the time period which funds are tied up in the form of working capital, and represents a standard measure of WCM (Brigham Houston, 2007). Computation for CCC is arrived at by making an estimate of inventory conversion period and accounts receivable conversion period, less accounts receivable conversion period. Reduction in the period of time that cash is tied up in cash operating cycle improves profitability of businesses and market value hence the significance of efficiency in cash management practices so as to make an improvement on performance of businesses (Ross et al, 2008). According to Jose et al (1996), there is also a significant negative relationship between the Cash conversion cycle and profits. Their results confirmed that aggressive working capital management results in a higher profit. Jose et al (1996) were examining the relationship between profitability and aggressive working capital management among US companies. Cash conversion cycle was used as measure of working capital management. McMenamin (1999) stated that efficient working capital requires constant credit performance update and also sound criteria to develop credit extensions. Credit management becomes efficient when a firm is able to carry sufficient stocks as well as pay its bills on time. Investing in working capital management has its costs and benefits. Carrying cost and shortage costs for instance should be reduced to the minimum level of current assets. There is therefore the need to strike an optimal level between the costs and benefits of current assets (Brealey et al, 2004). Lyroudi and Tryfonidis (2006) posit that there is a significant relationship between the traditional liquidity measures of current and quick ratios, and cash conversion cycle. They used the food industry in Greek to determine the relationship between the liquidity ratios and its component variables. The cash conversion cycle was used as a liquidity indicator. The cash conversion cycle had no relation with the leverage ratio but had positive relation with net profit and return on assets. They concluded that both large firms and small ones have the same liquidity ratios. There is no difference between them. Teruel Solane (2005) undertook an analysis of corporate cash holdings of SMEs in Spain and established that the SMEs with higher levels of liquid assets have a tendency of reducing their cash levels because the assets can be used as substitutes and firms with a higher proportion of short-term debt have a tendency of holding higher levels of cash, so that it lowers the risk of non-renewing short-term debts. On the other hand, Abel (2008), undertook an examination of 13,287 Swedish manufacturing SMEs and established that high efficiency in WCM accelerates the current assets quickly being transferred into cash so that the balance from average investments in inventory and accounts receivable are converted into cash leading to high cash holdings. Manoj Keshar (2007) analyzed the working capital performance non-financial corporate firms in India aided by the methodology developed by Anand and Gupta (2003) using the data with at least three years of publicly available records over the period of 2001 to 2002 to 2003 to 2004 for corporate and sector. The CCC period had reduced by 10.2 and 12.7 respectively on compounded annual basis. Findings revealed very little evidence on the positive relationship between working capital management and profitability. A research of 94 companies listed on Islamabad Stock Exchange, Pakistan covering the period 1,999 t0 2,004 on the influence of WCM on profitability conducted by Reheman (2007) established a significant inverse relationship between working capital ratios for average accounts receivables duration, inventory turnover duration, average accounts payable period and CCC and firms profitability. Reheman concluded that positive value can be created for shareholders through reduction of CCC up to an optimum level. A study by Lazaridis and Tryfonidis (2006) on working capital performance of 131 firms listed on the Athens Stock Exchange (ASE) between 2001 and 2004 established that there exist a significant inverse relationship between CCC and gross operating profit. Lazaridis and Tryfonidis concluded that firms can increase their profits through effective management of CCC maintaining minimum levels of each component of working capital. Deloof (2003) found established that there is a significant inverse relationship between CCC and its various components. These components are the accounts payables turnover, accounts receivable days outstanding and the inventory turnover period, together with the firms profitability. Therefore, some financial managers can increase their firms liquidity through reduction of the period of inventory turnover. These managers therefore ought to first visualize it as stacks of money sitting on the forklifts, shelves, pallets, storage tanks, trucks, tanks and planes while in transit. This money is idle as it is not earning any interest and neither is it being immediately invested to churn profits. Therefore, a firms goal should be to minimize its inventory as much as possible. However inventory also serves as a precautionary measure as it decouples systems working in tandem and helps the business to manage uncertainty. 2.4 Conceptual Framework Conceptual framework is a scheme of variables which the study Operationalization in order to achieve the set of objectives. Conceptual framework is the concise description of phenomenon being studied, accompanied by visual depiction of the variables being studied (Mugenda Mugenda (2006). The variables under research are (1) profitability, the dependent variable (2) independent variables, namely accounts receivable period, inventory holding period, accounts payable period, and cash conversion cycle and (3) the intervening variables, are growth in total assets and sales. Conceptual framework for this research, which depicts the relationships between the research variables, is presented in figure 2.1 below. Independent Variables Intervening variables Dependent Variable Figure 2.1 Conceptual Framework (Author, 2018) 2.5 Summary of literature review and Research Gaps In all firms, irrespective size, WCM has been established to be key to effective financial management. As argued by Teruel and Solano (2007), many of the previous studies on WCM had a focus on large firms, with little emphasis on SMEs, whose main sources of external finance are their current assets and current liabilities, owing to the fact that SMEs face difficulties in accessing long-term credit in the capital markets. Reviews of available literate also reveal conflicting arguments on different WCM practices and how they influence firm profitability. For example, whereas most research findings show that shorter CCCs increase profitability, some study findings depict the converse. According to Nobanee (2009), there are times when shorter CCCs have association with high opportunity costs and longer CCCs have high association with high carrying costs and hence longer cash conversion cycle might increase profitability. 2.6 Chapter Summary The desk review has been explored in this chapter, focusing on the theoretical framework upon which the research is anchored, provided a discussion of the empirical literature on the relationship between the independent variables, namely accounts receivables period, inventory holding period, accounts payables period, and cash conversion cycle on one hand and profitability on the other hand. The next chapter will look into the research methodology. This will include the research design, population and sampling design, research procedure and analysis of the data. CHAPTER THREE RESEARCH METHODOLOGY 3.1 Introduction The research design, including the target population, data collection methods, research procedures, data analysis, interpretation and presentation are described. The following sections provide a detailed description of the research methodology used in the study. 3.2 Research design Descriptive research design will be used in this study. Descriptive design is best suited for this study since it results in a description of the data, whether in words, pictures, charts, or tables, and whether the data analysis shows statistical relationships or is merely descriptive. Researchers based on a carefully selected representative sample can produce results that are broad, credible and reliable to the whole population. Descriptive design is preferred since it focuses on data rather than theory besides the financial constraints. In this case, it will be possible to administer the data collection tools to the respondents in their duty stations with relative ease, and this will play a great role in increasing the response rate. Mugenda and Mugenda (2006) noted that descriptive statistics enable meaningful description of a distribution of scores or measurements using a few indices or statistics. Descriptive statistics help to simplify large amounts of data in a sensible way. Each descriptive statistic reduces lots of data into a simpler summary. Measures of central tendency will be obtained using mean scores, while measures of variability will be presented in the form of standard deviations. Frequency distributions show a record of the number of times a score or record appears. 3.3 Target population Mugenda and Mugenda (2006) observed that the target population should have observable characteristics to which the study intends to generalize the result of the study. The population of this study will consist of the 9,756 registered SMEs in the manufacturing sector in Eldoret town, Uasin Gishu County as at 30th December 2017.(Uasin Gishu County Ministry of Trade, 2017). 3.4 Sampling design and sample size Burns and Groove (2001) refer to sampling as a process of selecting a group of people, events or behavior with which to conduct a study. Polit Hungler (2001) confirm that, in sampling a portion that represents the whole population is selected. Since the population size in known, the Yamane formula for determining the sample size will be used n N / (1 Ne2). Where, n corrected sample size, N population size, and e Margin of error (MoE), e 0.05 based on the research condition. Since the population is 9,756, sample size will be 9,756/(1 9,756 (0.052)) 9,756/25.39 384 business owners/manager. To manage the exercise, simple random sampling will be employed. 3.5 Data collection 3.5.1 Data collection instruments and procedures Primary data will be collected with the aid of a self-administered detailed questionnaire that will target managers/owners of SMEs in the manufacturing sector in Eldoret town. According to Neuman (2006), a questionnaire is a written document in quantitative research that has set of questions directed at respondents. Kothari (2004) asserts that structured questionnaire is best suited for descriptive study as it is easily applied and requires less skill. The questionnaire will be designed to answer the questions identified in the problem statement. Structured questions will be presented on a likert scale. The likert scale, commonly used in business research will be used because it allows participants to respond with degrees of agreement or disagreement. The ratings are on a scale from 1 (lowest impact or least important) to 5 (highest impact or most important). The advantage of closed questions is that it is easier and quicker for respondents to answer. Furthermore, the answers of different respondents are easier to compare code and statistically analyze. There are also fewer irrelevant or confused answers and replication is easier. Closed questions are an appropriate means of asking questions that have a finite set of answers of a clear-cut nature. Sometimes this is factual information, but closed questions are also used for obtaining data on attitudes and opinions (Anon, 2003d). 3.5.2 Pilot study A pilot study is a small scale preliminary study conducted in order to evaluate feasibility, time, cost, adverse events, and size (statistical variability) in an attempt to predict an appropriate sample size and improve upon the study design prior to performance of a full-scale. Kothari (2004) observed that a pilot study gives the researcher the opportunity to evaluate the usefulness of the data. A sample size of 10 20 of the sample size for the actual study is a reasonable number of respondents to consider for participation in a pilot study (Baker 1994). A pilot study will be conducted on 10 of the target sample of 384, which is 38 SMEs owners/managers. The pilot study should help in revealing questions that are vague and allow for their review until they convey the same meaning to all the subjects (Mugenda Mugenda, 2006). 3.5.3 Validity of Data Collection Instrument Validity refers to the extent to which the data collection instrument measures what it is supposed to measure. According to Sekaran (2006), content validity is a judgmental act where experts check whether the items represent the construct which is being studied as well as the wording, formatting and scoring of the instrument. Two steps were taken to ensure validity. Firstly, wherever possible, research questions from prior studies were used to improve the validity of the research instrument, in particular (Hall, 2000). Secondly the instruments were reviewed by the University supervisors to ensure that validity is met. The validity tests were undertaken so as to assess the structure, length, and appropriateness of the questions used. 3.5.4 Reliability of Data Collection Instruments A reliable measuring instrument is one that gives the researcher the same measurements when the researcher repeatedly measures the same unchanged objects or events. Cresswell (2009) observed that reliability reflects the degree to which the researcher will get the similar results even with repetitive measure reliability states the consistency of a measure which reflects expectations of similar results from one administration of an instrument to another administration. Sekaran (2006) opined that reliability analysis is conducted to ensure that the measures of variables have internal consistency across time and across the various items that measure the same concept or variable. Data collected during pilot test will be tested for relevance and consistency of results in order to minimize errors. Data collected during pilot test will be tested for relevance and consistency of results in order to minimize errors. Commonly, the measure of reliability of research instrument is the Cronbach Alpha Coefficient, which was used for this study. The alpha coefficient ranges in value from 0 to 1 (Rovai, 2002). Cronbachs Alpha Coefficient value of 0.7 was used as the cutoff point and all items whose value is less than 0.7 were considered weak, thus left out. Data collected during pilot test will be tested for reliability by determining Cronbach alpha coefficient of reliability. 3.6 Data analysis and Presentation 3.8 Chapter Summary This chapter has presented the research design, including the target population, data collection methods, research procedures, data analysis, interpretation and presentation are described. The next chapter presents analysis and findings of the study. REFERENCES Afrifa, G.A. (2013). Working Capital Management Practices of UK SMEs The Role of Education and Experience. International Journal of Academic Research in Accounting, Finance and Management Sciences. Vol. 3, No. 4, October 2013, pp. 185196. E-ISSN 2225-8329, P-ISSN 2308-0337 Agyei, K.N. (2014). Small scale businesses practice of basic financial management with regards to liquidity. International Journal of Research In Social Sciences. Sept. 2014. Vol. 4, No.5. ISSN 2307-227X Agyei-Mensah, B.K. (2012). Working Capital Management Practices of small Firms in the Ashanti Region of Ghana. International Journal of Academic Research in Business and Social Sciences. January 2012, Vol. 2, No. 1 ISSN 2222-6990. Anand and Gupta (2003), Working Capital Management of Corporate firms in India, Business Journal. Attom, B.E. (2015). Cash management practices by micro and small-scale Enterprises at Kasoa in the central region of Ghana. Asian Journal of Business and Management Sciences. Vol. 3 No. 02 01-12. ISSN 2047-2528. HYPERLINK http//www.ajbms.org www.ajbms.org. Autukaite and Molay (2011), cash holding, working capital and firm value evidence from France, International conference of the French Finance association (AFFI), Pp11-13 Bagchi, T.P. (2013). Working capital and profitability Establishing causality. Journal of Accounting and Management, Vol. 3(2), pp.1 26. Banos, M. B. (2010). Impact of Working Capital Management on the Profitability of Public Listed Firms in the Netherlands during the Financial. Journal of Finance. vol.5 No. 1, p 20-27 Boer, G. (1999). Managing the cash gap. Journal of Accountancy, Vol. 188 (4),pp. 27-32. 53 Brigham, E.F. Houston, J. F (1999). Fundamentals of financial management, Orlando Dryden Press Burns, N., Grove, S. (2001). The practice of nursing research conduct, critique and utilization. Philadelphia, Pennsylvania Central Bureau of Statistics. (2004), National micro and small enterprise baseline survey. (Nairobi, Republic of Kenya). Chopra, S., Meindl, P., Kalra, V. (2007).Supply chain management strategy, planning and operation. New Delhi Dorling Kindersley. Creswell, J.W. (2009). Research Design. Qualitative, quantitative and mixed methods approaches (3rd edition) SAGE Publications ltd Danuri, M., Satoto K. I. (2011). Design system fuel inventory control in gas station with the concept of min-max stock level and time phased order point, proceedings of the 1st International Conference on Information Systems for Business Competitiveness (ICISBC). Deloof, M. (2003), Does Working Capital Management Affect Profitability of Belgian Firms Journal of Business Finance Accounting, Vol. 30, Issue 3/4, pp. 573-587 Dimitrios P. K. (2008), The effect of inventory management on firm performance, International Journal of Productivity and Performance Management, Vol. 57 No.5, pp.355-369 Dryden Press, pp.261-76 Financial Executive. Dinku, T. (2013). Impact of Working Capital Management on Profitability of Micro and Small Enterprises in Ethiopia The Case of Bahir Dar City Administration. International Journal of Accounting and Taxation, Vol. 1 No. 1, December 2013. Falope, O.I. Ajilore, O.T. (2009), Working capital management and corporate profitabilityevidence from panel data analysis of selected quoted companies in Nigeria. Research Journal of Business Management, 3 73-84. Fening, F.A. (2012). Impact of Quality Management Practices on the Performance and Growth of Small and Medium Sized Enterprises (SMEs) in Ghana. International Journal of Business and Social Science. Vol. 3 No. 13 July 2012. G.O.K (2010). Kenya Vision 2030 The Popular Version, Nairobi Government Printer. G.O.K (2012). Kenya Vision 2030 The Popular Version, Nairobi Government Printer. Gakure, R. Cheluget, K. J., Onyango, J. A., Keraro, V. (2012). Working Capital Management and Profitability of Manufacturing Firms Listed at The Nairobi Stock Exchange. Prime Journal of Business Administration and Management, 680-686. Gawali, R.B. Gadekar, A. (2017). Financial Management Practices in Micro, Small and Medium Enterprises-An Exploratory Analysis with the help of Literature Review. International Journal of Research in Finance and Marketing (IJRFM) Available online at HYPERLINK http//euroasiapub.org/current.phptitleIJRFM http//euroasiapub.org/current.phptitleIJRFM. Vol. 7 Issue 6, June – 2017, pp. 4559 ISSN(o) 2231-5985. Government of Kenya (GoK), (2005). Sessional Paper No. 2 of 2005 on Development of Micro and Small Enterprises for Wealth and Employment Creation for Poverty Reduction.Government Printers, Nairobi, Kenya. Hamza, K., Mutala, Z. Antwi, S.K. (2015). Cash management practices and financial performance of small and medium enterprises (SMEs) in the northern region of Ghana. International Journal of Economics, Commerce and Management, United Kingdom. Vol. III, Issue 7, July 2015. http//ijecm.co.uk/ ISSN 2348 0386. IMF (2001). Kenya Poverty Reduction Strategy Paper IMF Country Report No. 10/224 Jose, M.L., C. Lancaster and J.L. Stevens, (1996). Corporate returns and cash conversion cycles. J. Econ. Finance, 20 33-46. Karadag, H. (2015). Financial Management Challenges In Small and Medium-Sized Enterprises A Strategic Management Approach. Emerging Markets Journal. Volume 5 No 1 (2015) ISSN 2158-8708 (online) DOI 10.5195/emaj.2015.67 HYPERLINK http//emaj.pitt.edu http//emaj.pitt.edu. Kargar, J. and R.A. Bluementhal, (1994). Leverage impact on working capital in small business. TMA J., 14 46-53 Ltd. Kenya Economic Report (2013). Creating an Enabling Environment for Stimulating investment for Competitive and Sustainable Counties. Kenya Institute for Public Policy Research Institute. Kenya National Bureau of Statistics (2007). Kenya Economic Survey. Nairobi Government printers. Kenya National Bureau of Statistics, (2007), Micro and Small Enterprise Survey, 2007, Nairobi, Kenya. Kiprotich, S., Kimosop, J., Sarmwei, J. Abalo, M. (2015). An assessment of the performance of working capital management practices on small and medium enterprises in Eldoret Municipality. International Journal of Economics, Commerce and Management, United Kingdom. Vol. III, Issue 8, August 2015. http//ijecm.co.uk/ ISSN 2348 0386. Kothari, C. R., (2004). Research methodology Methods and techniques. New Delhi New Age International (P) Ltd, Publishers. Kotler P Keller, K.L. (2006). Marketing Management, 12th ed. Upper Saddle River, New Jersey Pearson Prentice Hall. Lakew, D.M. Rao, D.P. (2015). Effect of financial management practices and characteristics on profitability A study on business enterprises in Jimma town, Ethiopia. Abhinav National Monthly Refereed Journal of Research in Commerce Management HYPERLINK http//www.abhinavjournal.com www.abhinavjournal.com. Volume No.2, Issue NO.5 ISSN 2277-1166 Lazaridis I, Dimitrios T (2005). The relationship between working capital management and profitability of listed companies in the Athens Stock Exchange. Journal of Finance Management Analysis, 14, 18 26. Lazaridis, J., Tryfonidis, D. (2006). Relationship between working capital management and profitability of listed companies in the Athens Stock Exchange. Journal of Finance Management Analysis, 19, 26-35. Manoj, A. Keshar, M.(2007). Working Capital Management of Corporate firms in India, Business Journal. Marfo-Yiadom, E. Agyei, S.K. (2013). Working capital management practices of small scale enterprises in the central region of Ghana. Asian Journal of Business and Management Sciences. ISSN 2047-2528 Vol. 1 No. 4 29-47. www.ajbms.org Mathuva D. (2010), The influence of working capital management components on corporate profitability a survey on Kenyan listed firms. Research Journal of Business Management, 3 1-11. Mathuva, D. M. (2010). The Influence of Working Capital Management Components on Corporate Profitability A survey on Kenya Listed Firms. Research Journal of Business Management, 1-11. Mennah, A. Fouad, A. (2013). Factors affecting the performance of small and medium enterprises (SMEs) in the manufacturing sector of Cairo, Egypt. International Journal Of Business And Management Studies Vol 5, No 2, 2013 ISSN 1309-8047 (Online). Moyer, R.C., J.R. McGuigan and W.J. Kretlow, (1992). Contemporary Financial Management. 5th Edition. West Publishing Company, United States of America, ISBN 0 314 91348. Mugenda, A. Mugenda, O. (2006). Readings in research methods Quantitative and qualitative approaches. African Centre for Technology Studies Nairobi. Mutoko, W.R. (2014). Challenges of access to markets and opportunities for small, medium and micro enterprises (SMMEs) in Botswana. European Scientific Journal. August 2014 /SPECIAL/ edition ISSN 1857 7881 (Print) e – ISSN 1857- 7431. Ndagijimana, J.P. Okech, T.C. (2014). Determinants of Working Capital Management Practices in Small and Medium Enterprises in Nairobi. International Journal of Business and Social Science. Vol. 5, No. 12 November 2014. Neuman, W.L. (2006). Social research methods quantitative and Qualitative approaches, 6th Edition. Toronto Dorling Kindersley. Nobanee (2009), Working capital management and Firms Profitability An optimal Cash Conversion Cycle homepage, in http// papers.ssrn.com/ sol3/ papers.cfm abstract_id 1471230. Nobanee and AlHajjar (2009b), A note on working capital management and corporate profitability of Japanese firms, home page, in HYPERLINK http//papers.ssrn.com/sol3/papers.cfmabstract http//papers.ssrn.com/sol3/papers.cfmabstract. Nthenge, D. Ringera, J. (2017). Effect of Financial Management Practices on Financial Performance of Small and Medium Enterprises in Kiambu Town, Kenya. American Based Research Journal, Vol-6-Issue-1 Jan-2017 Nyakundi, T., Ombuki, C., Evusa, Z. Ariemba, J. (2016). Influence of Working Capital Management Practices on Financial Performance of Small and Medium Enterprises in Machakos Sub-County, Kenya. International Journal of Sciences Basic and Applied Research (IJSBAR) (2016) Volume 30, No 4, pp 286-309. Nyangau, F.O. (2013). Challenges Facing Micro and Small Enterprises in Inventory Management in Kisii Town, Kenya. IOSR Journal of Business and Management (IOSR-JBM) e-ISSN 2278-487X, p-ISSN 2319-7668. Volume 13, Issue 5 (Sep. – Oct. 2013), PP 20-29 www.iosrjournals.org Oketch HO (2006). Micro and small Enterprises in Kenya Agenda for improving the Policy Environment. Nairobi ICEG. Owoetoni, A., Amuche,A. Utomi, Q.R.A. (2015). The impact of working capital management on profitability of small and medium scale enterprises in Kaduna Metropolis. International Journal of Advanced Studies in Economics and Public Sector Management. Volume 3 Number 1, May 2015. Pandey, I.M, (2004). Financial Management – Ninth Edition. Vikas Publishing House Pvt Park, CA Sage Publications, Inc. Peel, M and Wilson, K. (1996). Assessing Growth of MSEs in Africa. A new Dimension. Strategic Management Journal, 565-586. Peterson, A. (2012).Working Capital management practices of SME in Ghana Kwame Nkrumah University Pinches, G.E. (1992), Essentials of financial management. 4th Edition., HarperCollins Publishers, New York, ISBN 0-06-500450-7. Polit, D.F., Beck, C.T. Hunger, B.P. (2001). Essentials of nursing research Methods, appraisal and utilization (5th edition). Philadelphia Lippincott. Raheman, A. Nasr, M. (2007). Working capital management and profitability-A case study of Pakistan Firms International Review of Business Research Papers Vol.No.2 Rathnasiri, U.A.H.A. (2015). The Financial Management Practices of Small and Medium Enterprises in Sri Lanka. Global Journal of Contemporary Research in Accounting, Auditing and Business Ethics (GJCRA). An Online International Research Journal (ISSN 2311-3162). 2015 Vol 1 Issue 2. Republic of Kenya (2008). Economic Survey. Nairobi Kenya Government Printers Kenya, 2008. Republic of Kenya (2012).The Micro and Small Enterprises Act. Published by the National Council for Law Reporting with the Authority of the Attorney-General. International Journal of Scientific and Research Publications, Volume 4, Issue 12, December 2014 25 ISSN 2250-3153. www.ijsrp.org Republic of Kenya. (1999). National micro and small enterprises baseline survey results. Nairobi Government Printers. Republic of Kenya.(2009). Sessional paper No. 2 of 2009 on development of SMEs for wealth and employment creation and poverty reduction. Nairobi Government Printers. Richards, V.D. Laughlin, E.J. (1980), A cash conversion cycle approach to liquidity analysis. Finance Management Paper,9 32-38. Ross, S. A. Westerfield, R. W. Jaffe, J. (2009). Corporate finance, 5th edition, Irwin and McRaw-Hill, Boston. Ross, S.A., R.W. Westerfield and B.D. Jordan, (2003). Fundamentals of Corporate Finance. 6th Edition. McGraw-Hill Irwin Publications, New York, ISBN 0-07-246974-9, pp 167. Sekaran, U. (2006). Research methods for business A skill building approach, Wiley, Singapore. Studies). Nairobi University, (Unpublished Report) Shah, N. (2016). Impact of Working Capital Management on Firms Profitability in Different Business Cycles Evidence from Pakistan. Journal of Finance Economics Research Vol. 1(1) 58-70, 2016 Singh, P., (2008), Inventory and Working Capital Management An Empirical Analysis, The IUP Journal of Accounting Research and Audit Practices, IUP Publications, vol.0(2), Pp. 53-73 Sonia, P., (2009). Inventory and Working Capital Management An Empirical Analysis. The IUP Journal of Accounting Research and Audit Practices, IUP Publications, vol.0 (2), Sople, V.V. (2010). Logistics management. (2nd Edition). New Delhi Dorling Kindersley. Sunday, J. (2011). Business Finance, Theory and Practice, 5th edition, University of Plymouth Business School. Financial Times Pitman Publishing. Sunday, J.K. (2011). Effective working capital management in small and medium scale enterprises (SMEs).International Journal of Business and Management, Vol. 6(9), pp.1 9. Swaminathan, A. M., (2001), Structural reforms and inventory management Evidence from Indian industries, International Journal of Production economics. 71, Pp. 67-78 Teruel, P.J.G. Solan, P.M. (2005). Effects of Working Capital Management on SME Profitability. Working Papers Series. Dept. Organizacin de Empresas y Finanzas, Facultad de Economa y Empresa, Universidad de Murcia, Campus Espinardo, Spain. Teruel, P.J.G. Solan, P.M. (2007). Effect of Working Capital Management on SME Profitability. International Journal of Managerial Finance, Vol. 3, PP.164-177. Vural, G., Sokmen, G.A., Cetenak, H.E. (2012). Effects of working capital management on firms performance Evidence from Turkey. International Journal of Economics and Financial Issues, Vol. 2(4), pp. 488 495. Wambugu, P.M. (2013). Effects of working capital management practices on profitability of small and medium enterprises in Nairobi county, Kenya MBA Unpublished Thesis, Kenyatta University. Wanjohi, K. (2009). Appropriate Financing for the MSE sector. The Accountant Journal of the Institute Of Certified Public Accountants of Kenya, July-August Pp 30-31. PAGE MERGEFORMAT i PAGE MERGEFORMAT 34 Profitability of SMEs Return on Assets (ROA) Growth in sales Growth in total assets Accounts Receivable Period Debt management policies Advance payments from customers Cash Conversion Cycle (CCC) Cash conversion policies Setting optimal CCC Setting optimal cash held Purchases and sales controls Accounts Payable Period Credit policies Setting credit periods for suppliers Effect of purchase discounts Inventory Holding Period Inventory management policies Inventory planning Re-order time Setting Economic Order Quantity levels Y, dXiJ(x(I_TS1EZBmU/xYy5g/GMGeD3Vqq8K)fw9
xrxwrTZaGy8IjbRcXI
u3KGnD1NIBs
RuKV.ELM2fiVvlu8zH
(W )6-rCSj id DAIqbJx6kASht(QpmcaSlXP1Mh9MVdDAaVBfJP8AVf 6Q JjdFwfe6T3uA,b3ILDCW/ JjdFwfe6T3uA,b3ILDCW/ JjdFwfe6T3uA,b3ILDCW/ JjdFwfe6T3uA,b3ILDCW/ U RU7oYzUqWT3y9OR3wqr0NK-IhpFx6add)[email protected] VHwJpRqTjkCvIo)[email protected]@Q3l U RU7oYzUqWT3y9OR3wqr0NK-IhpFx6add)[email protected] VHwJpRqTjkCvIo)[email protected]@Q3l U RU7oYzUqWT3y9OR3wqr0NK-IhpFx6add)[email protected] VHwJpRqTjkCvIo)[email protected]@Q3l U RU7oYzUqWT3y9OR3wqr0NK-IhpFx6add)[email protected] VHwJpRqTjkCvIo)[email protected]@Q3l U RU7oYzUqWT3y9OR3wqr0NK-IhpFx6add)[email protected] VHwJpRqTjkCvIo)[email protected]@Q3l [email protected]
oX)zB4bH7hyCyC3NehY CSIMPNL 4YR,ZJ(Tlvv1T ie)4clU_fSBc)qj9hpRYFIci4X25ZfO86dz0zl [email protected]
oX)zB4bH7hyCyC3NehY CSIMPNL 4YR,ZJ(Tlvv1T ie)4clU_fSBc)qj9hpRYFIci4X25ZfO86dz0zl U RU7oYzUqWT3y9OR3wqr0NK-IhpFx6add)[email protected] VHwJpRqTjkCvIo)[email protected]@Q3l