WORKING CAPITAL MANAGEMENT AND FINANCIAL PERFORMANCE AMONG NATIONAL REFERRAL HOSPITALS IN KENYA

Lilian Akinyi Agenya, Dr. Tumaini Mwikamba

Abstract


The general objective of this study was to examine the effect of working capital management on financial performance among National Referral Hospitals in Kenya. To achieve the general objective, this study was guided by the following specific objectives: to find out the effect of accounts receivable and to examine the effect of accounts payable on the financial performance of National Referral Hospitals in Kenya. the study was underpinned by the transaction cost economics theory. The study used a correlational research design that targeted respondents from National Referral Hospitals in Kenya, though only two hospitals were sampled, i.e., Kenyatta National Hospital and Moi Teaching and Referral Hospital, since their bed capacity is above 1,000 and they handle a large number of patients. Census design was used to obtain views on the accounts receivable and accounts payable from the respondents. Questionnaires were used as research instruments to collect data. Quantitative data for FY 2018 to 2022 was obtained from the organization’s published financial statements. The study found that accounts receivable and operating margin have a weak but favorable correlation. This result implies that although there is a correlation between the two variables, accounts receivables have a relatively minor effect on the operating margin. The results indicate a moderately favorable relationship between operating margin and accounts payable, indicating that efficient payables management can improve financial performance. The study concluded that accounts receivable within Kenya’s national health referral hospitals reveal a consistent and stable working capital management strategy marked by efficient billing and collection procedures. Kenya’s national health referral hospitals’ accounts payable procedures provide insight into their financial management strategies, indicating a propensity for lengthier credit terms with suppliers and postponed payments. The study recommends that hospitals should acknowledge and integrate the interdependence of inventory control, cash management, and accounts receivable management.

Keywords: Accounts receivable, accounts payable, financial performance, National referral hospitals


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