INFLUENCE OF CASH FLOW MANAGEMENT ON FINANCIAL PERFORMANCE OF SACCOS IN NAIROBI CITY COUNTY: A CASE OF JAVA SACCO
Abstract
Purpose of Study: This study aimed at examining the influence of cash flow management on financial performance of Savings and Credit Cooperatives in Nairobi City County: A case of Java SACCO.
Statement of Problem: A significant portion of SACCOs in Kenya are presently struggling to settle their debts due to cash flow complications. This situation has prompted some of them to issue profit warnings in compliance with the regulations set by the Sacco Societies Regulatory Authority (SASRA).
Literature Review: This study was informed by three theories: Free Cash Flow Theory, Financial Stewardship Theory and Agency theory. Free Cash Flow Theory provided support for the cash flow management variables used in this study by describing how cash flow should be managed. Financial Stewardship Theory explains how financial stewardship are to be able to work to improve SACCOs' financial performance, while Agency theory was pertinent to the study because it explained the extent to which financing cash flow influences the financial performance of the SACCO. Empirical review was performed where pertinent research related to the study variables was reviewed and summarized.
Methodology: This study used a causal research methodology, and secondary data was included in the secondary data. The yearly financial reports of Java SACCO during a ten-year period, from 2013 to 2022, was the primary source of secondary data for all the study's variables. Data was analyzed using descriptive statistics, correlation analysis, and multiple linear regression analysis using SPSS software.
Result: The findings revealed a coefficient of determination (R squared) of 0.629 and adjusted R squared of 0.615 at 95% significance level, implying that the independent variables used in the study namely; investing cash flow management, operating cash flow management and financing cash flow management jointly explains 62.9 % of the variation in the financial performance of Java SACCO.
Conclusion: The study concludes that cash flow management activities have significant influence on financial performance of Java SACCO and are crucial for the financial performance of Java SACCO.
Recommendation: The study thus recommends that the management of Java SACCO should focus on improving their investment activities, such as investing in profitable ventures, disposing of non-performing assets, and diversifying their investment portfolio.
Keywords: Cash Flow Management, investing cash flow, operating cash flow, financing cash flow, SASRA regulations, Financial Performance
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