EFFECT OF AVERAGE ACCOUNT RECEIVABLES ON PROFITABILITY OF PRIVATE SECURITY FIRMS IN KISUMU COUNTY, KENYA

Jackline Nyawira Mwangi, Ondiwa Simon Oluoch

Abstract


In today's dynamic business environment, efficient working capital management is a critical factor in sustaining and enhancing profitability, managing risk, and maximizing firm value. While companies strive to align their strategies with growth objectives and annual profitability, inadequate liquidity can hinder their ability to generate returns for shareholders. Therefore, adopting effective working capital management practices is essential. Despite the significance of working capital management, there is a gap in understanding its impact on the profitability of private security firms in emerging economies like Kenya. This study aimed to examine the effect of working capital management on the profitability of private security firms in Kisumu County, Kenya, for the period 2019–2023. Specifically, it assessed the impact of the average accounts receivable period on profitability. A correlational research design was employed, focusing on private security firms registered with the Private Security Regulatory Authority in Kisumu County. The study relied on secondary data obtained from financial statements, using Return on Assets (ROA) as a measure of profitability. The results indicated that the average accounts receivable period had a statistically significant positive effect on profitability (β1 = 2.012, t = 3.181, p = 0.04 < 0.05). These findings are valuable to private security firm managers, scholars, and policymakers, including government entities, as they provide insights into the role of working capital management in enhancing financial performance.

JEL: G31, L84, M41

 

Article visualizations:

Hit counter


Keywords


working capital management, average accounts receivable, return on assets, profitability

Full Text:

PDF

References


Achchuthan, S., & Kajamanthan, R. (2013). Corporate governance practices and working capital management efficiency: Special reference to listed manufacturing companies in Sri Lanka. Information and Knowledge Management, 3(2), 216-226.

Anser, R., & Malik, Q. A. (2013). Cash conversion cycle and firms’ profitability–a study of listed manufacturing companies of Pakistan. IOSR Journal of Business and Management, 8(2), 83-87.

Creswell, J., & Plano-Clark, V. (2011). Designing and conducting mixed methods research. CA: Sage: Thousand Oaks.

Fraenkel, R. J., & Wallen, E. (2000). How to design and evaluate research in education (Fourth ed.). San Francisco: McGraw-Hill.

Gerrit, S., & Mohammad, J. A. (2010). Monitoring effects of the internal Audit Function: Agency Theory versus other explanatory variables. International Journal of Auditing. Blackwell Publishing Ltd.

Hutchinson, M., & Gul, F. A. (2004). Investment opportunity set, corporate governance practices and firm performance. Journal of Corporate Finance, vol. 10 No. 4, 595-614.

Iyewumi, T. A., Remy, H., & Omotayo, M. (2015). Working capital management and firm’s profitability: the case of oil and gas industry in Nigeria. Journal of Electronics and Computer Science, 2(3), 1-21.

Kiptoo, I. K. (2017). Working capital management practices and financial performance of tea processing firms in Kenya. Embu: Doctoral dissertation, University of Embu.

Knauer, T., & Wöhrmann, A. (2013). Working capital management and firm profitability. Journal of Management Control, 24(1), 77-87.

Kothari, C. R. (2017). Research Methodology: Methods and techniques (3rd ed.).

Kumaraswamy, S. (2016). Impact of Working Capital on Financial Performance of Gulf Cooperation Council Firms. International Journal of Economics and Financial Issues, 6(3), 1136-1143.

Madugba, J. U., & Ogbonnaya, A. K. (2016). Working capital management and financial performance: evidence from manufacturing companies in Nigeria. European Journal of Accounting, Auditing and Finance Research, 4, 98-106.

Margaretha, F., & Oktaviani, C. (2016). Pengaruh Manajemen Modal Kerja Terhadap Profitabilitas pada Usaha Kecil dan Menengah Di Indonesia. Jurnal Bisnis Dan Akuntansi, 18(1), 11–24.

Mashayekhi, B., & Bazazb, M. (2008). Corporate governance and firm performance in Iran. http://dx.doi.org/10.1016/S1815-5669 (10)70033-3.

Mwaura, C. N. (2017). The Effect of Inventory Turnover on the Financial Performance of Medium and Large Retail Supermarkets in Kenya. Doctoral dissertation, School of Business, University of Nairobi.

Naseer, M., & Bibi, N. (2018). Liquidity management: comparison among manufacturing and merchandizing firms of Pakistan. International Journal of Information, Business and Management, 10(4), 124-137.

Rushdi, M., & Tennant, J. (2003). “Profitability of Australian Banks: 1985–2001”, . Agenda: A Journal of Policy Analysis and Reform, Vol. 10, No. 3, 229-243.

Sharma, A., & Kumar, S. (2011). “Effect of working capital management on firm profitability:empirical evidence from India”, Global Business Review, Vol. 12 No. 1. empirical evidence from India”, Global Business Review, Vol. 12 No. 1, 159-173.

Smith, A. (2019). Private Security Industry in Africa: Trends and Challenges. Journal of Security Studies, 25(2), 45-60.

Smith, A. (2022). The Impact of Credit Policy and Collection Procedure on Accounts Receivable Management. Journal of Finance and Accounting, 40(3), 150-165.

Van-Horne, J., & Wachowiez, J. (2005). Fundamentals of Financial Management. 11th ed. . New York: Prentice Hall.

Yahaya, A. (2016). Effects of working capital management on the financial performance of the pharmaceutical firms in Nigeria. International Journal of Economics, Commerce and Management United Kingdom, 4(4).

Yazdanfar, D., & Öhman, P. (2014). The impact of cash conversion cycle on firm profitability: An empirical study based on Swedish data. International Journal of Managerial Finance, 10(4), 442-452.




DOI: http://dx.doi.org/10.46827/ejefr.v9i1.1947

Refbacks

  • There are currently no refbacks.


Copyright (c) 2025 Jackline Nyawira Mwangi, Ondiwa Simon Oluoch

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.

The research works published in this journal are free to be accessed. They can be shared (copied and redistributed in any medium or format) and\or adapted (remixed, transformed, and built upon the material for any purpose, commercially and\or not commercially) under the following terms: attribution (appropriate credit must be given indicating original authors, research work name and publication name mentioning if changes were made) and without adding additional restrictions (without restricting others from doing anything the actual license permits). Authors retain the full copyright of their published research works and cannot revoke these freedoms as long as the license terms are followed.

Copyright © 2016 - 2026. European Journal of Economic and Financial Research (ISSN 2501-9430) is a registered trademark of Open Access Publishing Group. All rights reserved.

This journal is a serial publication uniquely identified by an International Standard Serial Number (ISSN) serial number certificate issued by Romanian National Library. All the research works are uniquely identified by a CrossRef DOI digital object identifier supplied by indexing and repository platforms. All the research works published on this journal are meeting the Open Access Publishing requirements and standards formulated by Budapest Open Access Initiative (2002), the Bethesda Statement on Open Access Publishing (2003) and  Berlin Declaration on Open Access to Knowledge in the Sciences and Humanities (2003) and can be freely accessed, shared, modified, distributed and used in educational, commercial and non-commercial purposes under a Creative Commons Attribution 4.0 International License. Copyrights of the published research works are retained by authors.