Cash Management and Profitability of Cement Industries in Kenya

Abstract

Kenya’s building and construction sector is amongst the most rapidly growing, experiencing an average growth rate of 14.2% for the period 2006 – 2011. Currently, the industry has six manufacturers namely; East African Portland Cement Company, Bamburi Cement Ltd, Athi River Mining, Cemtech, National Cement and Pandlu Cement.Thus, cash management assumes more significance than other current assets because cash is the most important asset that a firm holds. The objective of the study is to determine the extent to which cash management can affect profitability management in cement industries in Kenya. Descriptive research design was adopted. Questionnaires were administered to the target population. The results reveal that most of cement industries in Kenya are able to collects their debts in time, they use cash balances to meet their current obligations and are able to invest surplus cash wisely to increase their income levels. It is therefore recommended that organizations put in place a set of liquidity management policies and procedures will improve profits, reduce the risk of corporate failure and Management should also strive to maintain a very low cash conversion cycle as longer cycles may have negative effect on the liquidity of the companies because cash will be tied in raw material, inventory or account receivable.