Financial Management Practices And Financial Performance Of Kenya Tea Development Agency Managed Tea Factories In Kenya

ABSTRACT

Financial management in KTDA managed factories is concerned with ensuring funds are available when needed and that they are obtained and used in the most efficient and effective way to the benefit of the shareholders. Financial performance of KTDA managed tea factories in terms of service delivery continue being poor as depicted by low sales revenue and low profitability in most factories. There has been an issue of delay of the supply of services due to mismanagement of funds in these factories. Managing the movement of funds in relation to the budget is essential for shareholders and to the organization overall financial performance. This study was restricted to effect of financial management practices on financial performance of KTDA managed tea factories in Kenya. The study assessed the effect of capital structure decisions, working capital management, investment appraisal technique and investment budget management on performance of KTDA managed Tea Factories. This study would be of great importance to the management KTDA managed Tea Factories and other similar institutions on the matters concerning the challenges that are hindering financial management. The research used descriptive research design and its target population was 68 KTDA managed Tea Factories focusing on Factory Unit Manager (FUM) and Factory Accountant from each factory. The sample size of the study was selected by using multistage sampling method. Data was collected using questionnaires and analyzed using quantitative technique. The study found out that 50.9% of the respondents rated the effects of preferred stock as mix of capital structures that maximize shareholders’ wealth at very great extent. The study further revealed that appropriate capital structure decisions is affected by the firm size as rated as great extent by that 38.9% of the respondents. It was also deduced that ownership structure has an effect on the retained earnings as noted by 50.0% of the respondents as very great extent. The study further inferred that data management enhances future financial commitments as rated by 37.0% of the respondents at very great extent. Based on the results it was revealed that investment budget management and capital structure decisions have the highest effect on financial performance KTDA managed tea factories while working capital management and investment appraisal technique have the least effect. The study also recommends that management of KTDA managed tea factories should initiate investments which minimize disruption to the organizations. The study further recommends that KTDA managed tea factories’ managerial process should carry out continuous enrichment for good financial performances and they identify the cash balance that allows the business to meet day to day expenses but so as the business remain liquid. The study was however limited by limited access to materials related to financial management practices that are used by sampled tea factories hence appropriate information might not have been obtained. This study suggests that further research on the effects of financial management practices on financial performance of tea factories in Kenya that are not managed by KTDA should be conducted