EFFECT OF CASH MANAGEMENT ON PROFITABILITY OF TEXTILE AND APPAREL FIRMS IN KENYA
Abstract
The textile and apparel industry in Kenya contribute significantly to the country’s export earnings. However, it faces profitability challenges due to increasing competition both locally and internationally. This study investigated the effect of cash management on the profitability of textile and apparel firms in Kenya. The study was anchored on the Miller-Orr Model. Employing a correlational research design, data was collected from all 75 finance managers across Nairobi, Machakos, Mombasa, Nakuru, Uasin Gishu, Kiambu, Kilifi, Kitui, and Kisumu using structured questionnaires. Given the small population, a census approach was applied. Data was collected using a structured questionnaire, achieving an 84% response rate (n=63). The findings revealed a strong positive and statistically significant relationship between cash management and profitability (r=0.817, p<0.05). Regression analysis further indicated that cash management accounts for 66.7% of the variance in profitability (R2=0.667). The regression coefficient (B=0.661, p<0.05) confirmed that a one-unit increase in cash management practices leads to a 0.661 unit increase in profitability. The findings support the rejection of the null hypothesis, confirming a significant positive effect of cash management on profitability. The study concludes that effective cash management is a crucial determinant of profitability in the Kenyan textile and apparel sector. It was recommended that firms prioritize the adoption of advanced cash flow forecasting models and maintain adequate liquidity reserves to enhance financial performance and ensure long-term sustainability.
Keywords: Cash Management, Profitability, Cash Forecasting, Liquidity Management.
References
Adebayo, O., & Okeke, C. (2023). Financial management in Nigeria’s textile industry. African Journal of Economic Studies, 12(1), 45–60.
African Development Bank. (2023). Financial management in African manufacturing. AfDB Publications.
Brigham, E. F., & Houston, J. F. (2021). Fundamentals of Financial Management (15th ed.). Cengage Learning.
Business Daily. (2023, November 23). Rivatex reports KSh 300 million loss due to liquidity issues. Nation Media Group. Retrieved from
Central Bank of Kenya (CBK). (2023). Monetary Policy Statement – November 2023. Nairobi: CBK.
Dhruba, M. (2019). Cash management and profitability. Financial Review, 30(2), 234–248.
Export Processing Zones Authority (EPZA). (2024). Annual Report on the Performance of Kenya’s Textile and Apparel Sector. Nairobi: EPZA.
Gateri, C., Omari, J., & Nyangau, J. (2019). Working capital management in Kenyan firms. Journal of Business Finance, 35(1), 88–101.
Gitman, L. J., & Zutter, C. J. (2019). Principles of Managerial Finance (15th ed.). Pearson.
González-Díaz, R. R., Ovalles-Toledo, L. V., & Cruz-Ayala, K. (2022). Investment decisions and cash management models. In Perspectives and Trends in Education and Technology (pp. 269–280). Springer.
Hamida, S., Naveedb, A., & Hamidc, B. (2020). Cash management in textile firms. International Journal of Finance, 40(4), 122–136.
International Labour Organization (ILO). (2021). Textile industry financial performance. Geneva: ILO.
John, L., & Isango, E. S. (2021). Cash management strategies in listed companies. Journal of Financial Studies, 15(2), 89–104.
Kariuki, M., & Wanjiku, S. (2021). Working capital management in Kenyan manufacturing. Journal of Finance and Accounting, 9(2), 34–45.
Karuri, J., & Njuguna, A. (2020). Financial management in Kenyan firms. African Journal of Business, 12(3), 78–93.
Kenya Association of Manufacturers (KAM). (2023). Manufacturing Sector Performance Report 2023. Nairobi: KAM.
Kenya Institute for Public Policy Research and Analysis (KIPPRA). (2023). Textile sector challenges in Kenya. Nairobi: KIPPRA.
Kenya National Bureau of Statistics (KNBS). (2024). Economic Survey 2024. Nairobi: KNBS.
Kenya National Bureau of Statistics (KNBS). (2025). Economic Survey 2025. Nairobi: KNBS.
Kithinji, J. (2022). Working capital management and profitability. Journal of Financial Research, 60(4), 89–105.
Kothari, C. R. (2014). Research Methodology: Methods and Techniques (3rd ed.). New Age International.
Michalski, G. (2023). Cash management models. In Working Capital Management: Concepts and Strategies (pp. 117–136). Springer.
Ministry for Investments, Trade and Industry. (2024). Draft Cotton, Textile and Apparel Policy. Nairobi: Government of Kenya.
Motende, D. (2019). Cash management and firm profitability. International Journal of Business Studies, 39(2), 88–104.
Mugenda, O. M., & Mugenda, A. G. (2019). Research Methods: Quantitative and Qualitative Approaches (3rd ed.). ACTS Press.
Nkwasibwe, P., Katsigaire, M., & Bwesigye, M. (2023). Financial performance in textile firms. Journal of Business Management, 55(4), 78–93.
Olunja, A. (2022). Cash flow management and profitability. Journal of Financial Research, 63(1), 79–93.
Omyango, F. (2020). Working capital management and profitability. Journal of Business Economics, 38(3), 111–126.
Ross, S. A., Westerfield, R., & Jordan, B. D. (2018). Essentials of Corporate Finance (9th ed.). McGraw-Hill Education.
Samadzadeh, A. (2021). Cash management and economic order quantity models. Economic and Social Development: Book of Proceedings, 679–688.
Saunders, M., & Lewis, P. (2018). Research Methods for Business Students (8th ed.). Pearson.
Shin, H. H., & Soenen, L. (2019). Working capital efficiency and profitability. Financial Practice and Education, 8(2), 37–45.
Thompson, J., & Lee, K. (2020). Cash management in U.S. manufacturing. Journal of Financial Economics, 16(4), 123–138.
United Nations Industrial Development Organization (UNIDO). (2023). Textile industry performance in developing economies. Vienna: UNIDO.
World Bank. (2023). Global Economic Prospects – January 2023. Washington, DC: World Bank.
