Thesis:

Capital management practices on financial performance of Selected small and medium scale enterprises (smes) in Mandera County, Kenya

The capital management system has been a significant factor that has enabled businesses and firms to carry out their daily activities smoothly and efficiently. Economic fluctuations, financial constraints, and local interaction competitions have made businesses intensify their efforts in achieving the necessary efficiencies in their operations. The aim of the current study examined the impact of capital management practices on the financial performance of selected SMEs in Mandera County, Kenya. The study objectives were to examine the influence of capital planning, the role of cash flow analysis, the effect of payables management practices, and the effect of receivables management practices on financial performance of selected SMEs in Mandera County, Kenya. Two theories underpinned the study, and that is Cash Conversion Cycle Theory and Transaction Cost Theory. In the current study, a descriptive research design was utilized. The target population consisted of 241 employees from the 14 selected SMEs in Mandera County, Kenya. Where Taro Yamane's formula (1967) was used to calculate the sample of 150 respondents. The study employed primary data. Questionnaires were the main tool for data collection. Content validity to ascertain the validity of the instrument, reliability was ascertained using pilot test. The data were collected using a questionnaire and distributed by hand delivery method. Descriptive and inferential statistics aided in the data processing in establish the relationship between variables under the study. Tables, pie-charts, graphs, and diagrams for easy interpretation. Ethical consideration were upheld where an introduction and letter of approval was attained from Mount Kenya University and a research permit from Nacosti was sought. Confidentiality was assured to the respondents and maintained throughout the study. The result revealed that capital planning emerges as another critical variable, with a coefficient of 0.721, signifying its substantial impact on financial performance. Cash Flow Analysis at 0.280 demonstrates a notable positive influence on financial performance. Also, Payable Management Practices also positively influence financial performance, though to a slightly lesser degree, with a coefficient of 0.450. Lastly, Receivables Management Practices play a crucial role in enhancing financial performance, as evidenced by the high coefficient of 0.627. In conclusion, the findings suggest that all four financial management practices capital planning, cash flow analysis, payables management, and receivables management significantly contribute to the SMEs performance. Research recommended that SMEs should adopt systematic capital planning frameworks to allocate resources effectively and prioritize investments that promise long-term value.