International Academic Journal of Economics and Finance | Volume 3, Issue 8, pp.

167-185

CASHFLOW MANAGEMENT ACTIVITIES AND

FINANCIAL PERFORMANCE OF MANUFACTURING
FIRMS LISTED AT NAIROBI SECURITIES
EXCHANGE, KENYA
Feisal Matan Odhowa.
Master’s Student, Kenyatta University, Kenya.
Dr. Vincent S. Mutswenje, PhD.
Department of Accounting and Finance, Kenyatta University, Kenya.

2022
International Academic Journal of Economics and Finance (IAJEF) | ISSN 2518-2366

Received: 9th December 2022

Published: 16th December 2022

Full Length Research

Available Online at: https://iajournals.org/articles/iajef_v3_i8_167_185.pdf

Citation: Odhowa, F. M., Mutswenje, V. S. (2022). Cashflow management activities and

financial performance of manufacturing firms listed at Nairobi Securities Exchange, Kenya.
International Academic Journal of Economics and Finance, 3(8), 167-185.

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 International Academic Journal of Economics and Finance | Volume 3, Issue 8, pp. 167-185

ABSTRACT

The performance of industrial entities (mean and standard deviation) and panel
contributes significantly to economic regression analysis was used to analyse
development of Kenyan stock market as data. The diagnostic tests was carried out
well as national economy at large. before the actual analysis. The data was
Adoption of cash flow management presented using tables, graphs and
activities is intended to improve financial frequency tables. The study adhered to
performance yet the financial performance ethical considerations accordingly. The
of manufacturing firms continues to remain inferential statistics revealed that cash flow
erratic. Hence, it remains unclear whether management from operating activities has a
cash flow management activities statistically insignificant influence on the
significantly affects the performance of financial performance of manufacturing
industrial entities. Thus, in view of this firms (p=0.275>0.05). Cash flow
background, the study sought to assess the management from investing activities was
influence of cash flow management found to have a statistically insignificant
activities on the financial performance of influence on financial performance of
industrial firms listed at Nairobi securities manufacturing firms (p=0.125>0.05). The
exchange, Kenya. The specific objectives findings show however, firm size was not a
of the study are: to examine the influence of significant moderator (p=0.562>0.05) in
cash flow management from operating this study. The study suggested that with
activities, investing activities and financing the establishment of negative correlation on
activities and how they influence financial the financial performance, in pursuit of
performance of industrial firms listed at the higher profit and better performance the
Nairobi securities exchange, Kenya. manufacturing firms can utilize
Research hypotheses were tested at 0.05 management of cash flows, another study
significance level. This study was guided was suggested to be done using the same
by three theories, which include Keynesian variables but now using the Return on
theory of money, Free cash flow theory and Equity as the dependent variable. The study
cash flow management theory. The study suggested similar study to be carried out in
adopted causal research design. The target other sectors.
population comprised eight manufacturing
firms listed at the NSE where the study Key words: Cash flow Management
adopted a census. The time scope of the Activities, Operating Activities, Investing
study is five years, that is, year 2017 to year Activities, Financing Activities, Financial
2021. A data abstraction tool was used to Performance
collect secondary data. It adopted the panel
regression model. Descriptive statistics

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By promoting output, the manufacturing companies listed at the NSE play an important part in the
development of Kenya's stock market and, therefore, the overall economy. However, all of these
businesses' economic contributions might be undermined by their unpredictable and diminishing
performance. Thus, holding cash flows in accounts is costly to manufacturing firms (Kifle, 2017).
Globally, in China, the notion of accounting, which relates to revenues and expenditures inside the
company as a result of performance, emphasizes the word "cash flow". So as to enhance financial
performance and enhance cash flows in the industry, the regulator must implement cash
management rules across all deposits (Zhou, 2012). Contrarily, during periods of low cash and
operational surplus, cash inflows are lower than cash withdrawals. Since they play a significant part
in the attainment of the American economy's goals, effective cash management practices in the
financial sector guarantee that businesses work as efficiently as possible. Consequently, cash flow
is necessary for operations, the acquisition of assets, and the payment of stakeholders according to
the market return (Miles, 2015). In Poland, problems with cash flow have recently caused anxiety,
specifically with cash management, which has an impact on the organization's daily operations and
is crucial to achieving improved financial performance (Darek, 2012).

Regionally, in Nigeria, economic expansion the inability of the company to handle cash flow
effectively reveals how much it is struggling with its financial performance. (Nwanyanwu, 2015).
In most cases, a company's financial success is crucial since investing cash flows consider values
over gains in the financial statements. When making decisions, investors may give their risk
exposure greater consideration. This is because asset solvency, financial performance volatility, and
mortality or decrease are all indicators of these things. The risk in cash flows is classified as
operational, financing, and investing activities connected with business assets, not the abnormal
return, which does not determine the financial performance. According to Abdul (2009), cash flow
is one of these criteria that readers of financial statements rely on instead of accounting rules that
management may utilize improperly when making economic judgments.

In Ethiopia, in order to maintain optimal cash and surplus, management must guarantee that there
are always enough cash management rules in place. The primary factor influencing performance is
cost, which includes high material costs and the use of quality management. Successful management
is essential given the industry's complicated clientele, stakeholders, and investors (Sambasivan,
2013). The convergence of financing cash flows has increased competition, increased volatility,
and made it exceedingly difficult for manufacturing companies to survive in the market. In light of
cash flow data, the company is more exposed to demand variations due to the fierce competition
and increasing operating instability (Kifle, 2017). In Uganda, Cash flows are a crucial tool that may
be used to prevent incorrect interpretation of income statements prepared on an accrual basis. Since
cash flows may be influenced by costs, it is thought that they perform better than earnings. Adoption
of standards that are less likely to be exploited by management is necessary since profits are subject
to manipulation by management (Soyade, 2007). In Tanzania, the financial performance of
Tanzanian enterprises is not significantly impacted by operational cash flow. However, running a
business requires paying high prices for trade products and manufacturing raw materials, making
cash payments to creditors and other distributors, paying wages and salaries to staff, and paying
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taxes, fees, fines, and financing costs. Due to the perception that operational cash flows improve a
corporation's financial health, businesses are less likely to borrow additional money and pay higher
interest rates. While strong operational cash flows have a low credit risk, a company's inability to
generate adequate operating cash flows is filled by funding its ambitions and investments with
interest-bearing debt (Simpasa, 2014). In Kenya, the Nairobi Securities Exchange is part of the
capital markets which plays a critical role in the exchange of securities issued by listed firms. The
sector contributed about 10% of GDP in Kenya and helped create employment opportunities
(Wanja, 2019).

By promoting output, the manufacturing companies listed at the NSE play an important part in the
development of Kenya's stock market and, therefore, the overall economy. However, all of these
businesses' economic contributions might be undermined by their unpredictable and diminishing
performance. For instance, the industry performance indicated a declining trend of 11% in 2017,
9% in 2018, 8% in 2019, 8% in 2020 and 7% in 2021. The financial performance of some individual
firms also performed poorly, for instance, East African Breweries' financial performance showed a
downward tendency of 12.8% in 2017, 10% in 2018, 9% in 2019, 7.9% in 2020, and 7% in 2021.
Financial results for Carbacid Limited showed mixed results, with 10.7% in 2017, 8.8% in 2018,
7.6% in 2019, 8.9% in 2020, and 10.1% in 2021. Unga Limited, on the other hand, showed irregular
performance fluctuations, with ROA of -0.07% in 2017, 7.9% in 2018, 5% in 2019, and 0.55% in
2020 (NSE, 2021). While having implemented cash flow management, as seen throughout a five-
year span from 2017 to 2021, these companies' financial performance continues to deteriorate and
swing unpredictably. So, it's still uncertain if cash flow management significantly influences
manufacturing companies' financial success. This analysis aims to determine impact of cash flow
management activities on the financial performance of NSE, Kenya as a result of this deteriorating
and fluctuating performance.

The majority of empirical research about the connection amongst cash flow management practices
and financial performance was done in industrialized economies that are more developed than
emerging economies like Kenya. Furthermore, there are significant research gaps in these studies'
conclusions, preventing them from being extrapolated to the situation in Kenya. For illustration,
Njuguna (2013) investigated how the performance of medium-sized enterprises in Nyeri, Kenya,
was impacted by capital flows. This study's goal was to look at the relationship between profitability
and cash on hand, investment sensitivity, business size, and accounts receivable. 13 medium-sized
enterprises were included in the study's sample. The analysis did not incorporate operational and
financing cash flows, which are the two primary tasks in cash flow statements. Consequently, this
investigation aims to ascertain the impact of cash flows management activities on financial
performance of listed manufacturing firms in Kenya.

The main aim of the research is to assess how cash flow management practices influence financial
performance of industrial entities listed on Kenya's NSE.
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i. To assess the influence of cash flow management from operating activities on the financial
performance of industrial entities listed on Kenya's NSE
ii. To evaluate the influence of cash flow management from investing activities on the financial
performance of industrial entities listed on Kenya's NSE
iii. To determine the influence of cash flow management from financing activities on the
financial performance of industrial entities listed on Kenya's NSE

Keynes developed this hypothesis in 1936. The Keynesian school of thought identified three reasons
for keeping cash on hand: first, the requirement to preserve liquidity; second, the need for
transactions; and third, speculative and protective considerations. The presumption is that the desire
to keep cash to enhance performance when the necessity for a buy or advantageous exchange arises
is the speculative incentive. The only need to have cash on hand is as a safeguard against unforeseen
catastrophes. The necessity to transact in order to have cash on hand to cover everyday costs is the
motivation (Ali, 2013).

This theory's shortcomings include the fact that it merely offered reasons for hoarding cash, which
cannot be depended upon to boost businesses' financial success. Effective cash flow management
does not guarantee improved financial success for businesses. So as to examine profitability, which
might be adversely affected by cash flows, a corporation must maintain its cash flows statement
(Adelegan2017). Richardson (2016), asserts that the theory holds that businesses with excess cash
in their enterprises are more likely to be profitable, hence managing cash flow depends on the
manager's ability to allocate resources.

However, the theory may be used to evaluate how the company allocates its cash flow among its
available resources. A company often relies more on cash flows than performance to finance its
investments. This idea may be applied to calculate the yearly holding cost of managing accounts'
cash balances. This theory fitted this study to explain financial performance of a firm after giving
out cash and receiving in cash, thus it explained the need for cash to the firm to enhance
performance.

Jensen created the free cash flow theory in 1986. According to this theory, there is a surplus of
capital after financing successful businesses. According to this, net income from capital
expenditures (CAPEX) affects a company's financial success. High free cash flow, according to
Schoubben (2008), is calculated by combining borrowing with net income, depreciation and
amortization, minus capital expenditure, changes in non-cash flows, and net income. The argument
is predicated on the idea that management of companies with significant free cash flows is more
inclined to take on initiatives that would lower the firm's value. Free cash flows, also known as cash
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flows beyond what a business requires for capital expenditures, had a favorable impact on net
present value. Utilizing cash flow management would cut down on wasteful expenses for the
business. The goal of business expansion is to maximize profits at the expense of cash management.
Cost increases are predicted by cash flow models to lead to positive growth.

Darek (2012) questioned the theory that managers' desire to increase the size of the company is not
solely motivated by enhancing shareholders' wealth. Although an increase in cash flows does not
always mean that a manager has more resources at his disposal, it may lead to higher salaries
because compensation is closely tied to growth. As opposed to the constrained cash collections from
markets that must cover costs, the way to capitalize in the business is the concern for cash flow. The
relevance of the theory to cash flows is that it focuses on management of cash flows from investing
activities and shows the flow of cash to be either surplus or deficit in the cash budget.

The cash management theory developed by James Mao and Charlie Sarndral (1978) focuses on
liquidity. By covering cash losses or using its surplus, cash management entails controlling cash
inflows, cash outflows, and balances at certain times (Kipruto, 2013). Aziz and Dar (2006) claim
that it is challenging to anticipate cash flow since there are periods when it exceeds inflows and
other times when it does not, and there is thus a key interest in short-term management of the
company. Unbalanced income and cost may be the cause of poor cash management (Pandey, 2005).
According to Kibuchi (2018), reduced financial burden is a result of effective cash management.
Consistent cash flow imbalances that lead to corporate failure might be the cause of financial crises
in organizations (Aziz & Dar, 2006). The theory give reason for retaining cash balance from
operations to be used for investing, thus it addresses the cash flow management from operating
activities variable.

Mehtari (2016) investigated the association amongst operating cash flow and a company's
profitability in the TSE. The goals were to determine the impact of retained profits on profitability,
the impact of liabilities on profitability of the company, and the impact of dividend policy on
profitability. To examine the relationship between these two factors, the study employed
correlations analysis. The research looked at 19 publicly traded firms in the United States and three
different performance metrics, including market performance (based on changes in stock market
value), profitability (return on investment), and cash flow performance (dividend-per-share).
Companies with lesser total assets, greater liabilities, lower equity, an unbiased auditor's judgment,
and lower retained earnings, according to the study's findings, perform better in terms of cash flow
(as determined by cash dividend). It is advised that businesses have effective operating cash flow
management; as a result, regression analysis was employed in this study. As a result, there were
conceptual and contextual gaps, which the current study aims to solve by taking into account cash

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from operations, net cash-flow from working-capital adjustments, and noncash elements in the
Kenyan manufacturing industry. Additionally, panel regression analysis was used in the study.

Nwanyanwu (2015) looked at how operating cash-flow activities affect an organizational

performance in the Nigeria's tourism sector. The goals were to study how operational cash flows
affected an organization's performance, to ascertain how processing loans affected that
performance, and to discover how equity investments affected that performance. There were 45
hotels and print media companies in the sample. Inferential statistics utilizing correlations analysis
were employed in the investigation. The investigation came to the conclusion that taxes and cash
payments to suppliers had an impact on cash flow statement performance. In this research, operating
cash flow activities were examined using manufacturing enterprises. Consequently, there were
conceptual and subjective gaps that the current study attempted to close by include operating cash-
flow, net cash-flow from adjustments to operating capital, and noncash elements in Kenya's
industrial sector.

Frank & James (2014) evaluated the connection between operating cash flow activities and
corporate performance in Nigeria's food and beverage industry. The major goal was to determine
how financial information affected business performance. The financial statements of the firms
under examination were used to generate the data that was gathered. Five food and beverage firms
listed on the Nigerian Stock Exchange were sampled for the study. The technique of multiple
regression analysis was utilised to examine the data. According to the report, there is a strong
correlation between operational cash flows and corporate success in Nigeria's food and beverage
industry. The study concluded that operational cash flows had an impact on corporate performance
in Nigeria's food and beverage industry. In order to examine how operational cash flow affects
financial performance, descriptive statistics were utilized in the study. Consequently, there were
conceptual and contextual gaps that the current study attempted to close by include operating cash-
flow, net cash-flow from adjustments to operating capital, and noncash elements in Kenya's
industrial sector.

Rehaman (2017) investigated the profitability of a Pakistani company's cash-flow through investing
operations. The study's intention was to compare the disparities between operational net cash-flows
and commercial success in Pakistan. The objectives were to ascertain the impact of investing cash
flow on success, the impact of current assets on profitability, and the impact of current liabilities on
profitability for the company. 23 businesses made up the sample size. Descriptive statistics were
utilized in the investigation. Because they directly affect both liquidity and profitability, the findings
have significant implications for businesses. Current assets and current liabilities of the company
are included in the cash flow from investments. The study found that profitability is impacted by
net investment cash flows. According to the study, the amounts of interest generated should be
computed via the net investment, PPE purchases and sales, as well as the impact on profitability.
Unfortunately, the study did not apply correlation analysis to assess how investment activities affect
organizations' financial success. As a result, there were methodological and contextual gaps, which
the current study sought to remedy by focusing on Kenya and utilizing a panel regression model.
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Agala (2017) investigated how business characteristics influenced the association amongst
investing free cash flows and the financial performance of listed companies at the Nairobi stock
market. In order to understand how business characteristics affect the relation amongst investment
cash flows and financial performance, a research was conducted. The goals of the study were to
quantify the relationship between cash flow investments and the financial performance of NSE-
listed companies, as well as to identify how business characteristics and the magnitude of cash flow
investments affect financial performance. The study utilized secondary panel data that was gathered
from 55 NSE-listed businesses between the years of 2006 and 2015. Regression analysis was
utilized throughout data analysis. The results show that while business characteristics have a
detrimental effect on financial performance, free cash-flows have a considerable beneficial impact.
The emphasis of this study, which was not addressed, was cash flow invested.

Asif (2015) carried out research on investment cash-flows and productivity information from
companies listed on the Karachi Stock Exchange. The study's goal was to look at the profitability
and cash flows of investments. The study's objectives included determining the profitability impact
of cash collections on profitability, investigating the profitability impact of cash receipts from the
sale of intangible assets, and evaluating the profitability impact of cash payments made to build or
purchase long-term fixed assets. 37 companies that are listed on the Karachi Stock Exchange
comprised the sample. The analysis was descriptive. According to the report, investment cash flows
are crucial to both a company's long-term viability and corporate profitability. The analysis
discovered that current assets are used to fund a sizable portion of cash flow investments, hence it
is crucial for finance managers to effectively manage investment activities. Even though it is
recommended that cash flows from investment activities be reported after cash revenues from the
sale of bonds and company stock, cash receipts from cash payments made in the form of loans and
advances, and cash receipts from payments made to repay such loans and receivables, no consensus
has been reached on how to look into how investing activities affect financial performance. The
present study is being conducted in Kenya in order to close a contextual gap that occurred.

Gravetter in 2016 evaluated the profitability and financing cash-flows of SMEs in California. The
research intends to explore the effects of employing owner's capital, dividends, and long-term
obligations or debt on profitability. The study utilised secondary data from 7 SMEs. The data that
was gathered were examined using descriptive statistics. The findings showed that profitability and
financing cash flows had a favorable link. The study came to the conclusion that changes in long-
term obligations or debt, changes in owner's capital, and changes in dividends all influences the
financial performance. The study's findings suggest that a comparable item should be on the cash
flow statement and balance sheet. There existed the both the contextual and methodological gap
that the current study sought to fill by carrying the study in Kenya and adopting panel regression.
Bragg (2014) investigated the correlation between financing cash-flows and corporate effectiveness
in the London Stock Exchange-listed corporations. The goals were to determine how the
accumulating from stock, using debt issue, paying dividends, paying down debt, and repurchasing
shares would affect the company's performance. A sample of 8 businesses listed on the London
Stock Exchange was utilized in the study. The data utilized for analysis came from the released
financial statements of the 8 corporations. The association between financing cash flows and
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company performance was determined using component analysis. According to the study, there is
a substantial relationship amongst corporate success of London-listed corporations and investing
cash flows. The study came to the conclusion that financing cash flows should be utilized in relation
to funds arising from equity, debt issuance, dividend payment, debt repayment, and share
repurchase. Nevertheless, it is necessary to determine the impact of dividends, loans, and debts that
are recorded as cash-flow financing. When dividends are paid out, the rise in capital and adjustments
in financing cash are referred to as cash in. When an organization sells its bonds to the general
populace, it boosts its cash flow. As a result, the current study used inferential statistics to examine
financing cash-flows on financial performance in industrial companies that were not previously
studied.
Wanja (2011) examined the factors influencing cash holdings and their impact on SMEs
performance in Nairobi, Kenya. The study's goal is to better understand the factors that influence
cash holdings and how they affect small and medium-sized businesses' cash levels in Nairobi,
Kenya. In Nairobi, Kenya, 14 small and medium-sized businesses made up the sample size.
Regression modeling and simple correlations were utilized. The study demonstrates how cash flow
financing affects small and medium firms' performance. The study found that financing cash-flows
plays a significant influence in a company's decision to finance or invest, and that the FASB was
appropriate in releasing a statement of cash flows. For businesses to prepare cash flow statements
for the consumers of financial information, it is now necessary to examine financing cash flows. It
has not been fully addressed how cash in hand affects net change, cash payments, and cash
receivables. There existed both methodological and contextual gaps, consequently, the study used
multiple regressions to examine the impact of financing cash flow on the financial performance of
manufacturing enterprises.

Independent variable Dependent variable

Cash-Flow Management
from Operating Activities

Natural Log of Net

cash flow from
operating activities
Cash-Flow Management
from Investing Activities
Financial performance
Natural Log of Net cash flow
-ROA
from investing activities

Cash-Flow Management
from Financing Activities

Natural Log of Net cash flow

from financing activities

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The study utilized a causal research design. This is the best choice for studies that aim to identify
the cause and effect relationships between the variables under study. As a result, this is pertinent to
this study.

The target population were eight manufacturing companies listed at the NSE as at 31st December
2021 (NSE, 2022). Given that the population is small, the researcher used census to carry out the
study, which constituted all the 8 manufacturing firms at the NSE.

Secondary data from financial statements of NSE-listed companies were used in the study. The
financial performance indicator data was based on the firm financial information acquired from the
manufacturing companies' published annual financial statements for the five years commencing in
2017 and ending in 2022 under examination.

Utilizing descriptive statistics and panel regression analysis, the acquired panel data was examined.
Descriptive statistics was used to show the trends of the research variables for the five-year period
of study by specifically focusing on means and standard deviations. On the other hand, regression
analysis was utilized to demonstrate the independent factors' ability to predict the dependent
variable. The panel regression analysis was supported by STATA software.
The following defines the panel empirical model that was utilized in the investigation:
Yit = α + βXit + εit … … … … … … … … … … … … … … … … … … … … … (1)
Whereby: Yit=financial performance of manufacturing firm i at time t;i=observation (firm),
i=1,……..8 while t=the time period, t=2017, ……, 2021Xit=vector of independent
variables=coefficients, Α=constant term, εit=error term.
Equation 3.2, which was utilized for estimate, was created by expanding equation 3.1..
ROAit = α + β1 (X1it ) + β2 (X2it ) + β3 (X3it ) + εit … … … … … … … … … … … … … … … … … (2)
Whereas;
ROAit = Return on Assets of firm i at time t depicted by Net Income / Total Assets
X1it= Cash flow management from Operating activities (Natural Log. of Net cash flow from
operating activities) for firm i at time t;
X2it = Cash flow management from investing activities (Natural Log. of Net cash flow from
investing cash flows) for firm i at time t;
X3it = Cash flow management from financing activities (Natural Log. of Net cash flow from
financing cash flows) for firm i at time t;
α= Y intercept;
βs = determinants;
εit = error term.

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Variable Obs Mean Std. Dev. Min Max

ROA 40 .06775 .1197966 -.34 .34

Operating Activities 40 13.70046 3.119372 7.242798 19.13469

Investing Activities 40 12.55674 5.026078 -4.60517 19.34934

Financing Activities 40 10.95925 6.185853 -4.60517 19.47795

Source: Study Data (2022)

The findings show that the mean cash flow management from operating activities among the
manufacturing firms was 13.70046 with a minimum of 7.242798 and a maximum of 19.13469. A
standard deviation of 3.119372 was medium, and indication that there was a moderate dispersion
among the manufacturing firms themselves. The mean cash flow management from investing
activities was found to be 12.55674with a minimum of -4.60517and a maximum of 19.34934. A
standard deviation of 5.026078 was a bit high, which indicates large disparity where some
manufacturing firms had disproportionately higher cash flow management from investing activities
than others. The cash flow management from financing activities was high in almost all the
manufacturing firms with a mean of 10.95925, a minimum of -4.60517 and a maximum of
19.47795. A standard deviation of 6.185853 was very high, an indication that some manufacturing
firms had very high cash flow management from financing activities compared to others. Financial
performance, measured through return on asset had a mean of 0.06775with a minimum of -0.34 and
a maximum of 0.34. A standard deviation of 0.1197966 meant that the spread among the
manufacturing firms was stable, which means most manufacturing firms had stable ROA.

Panel regression analysis was used to assess the relationship between dependent (financial
performance measured in terms of return on assets) and independent variables (cash flow
management from operating activities, investing activities and financing activities).

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Table 1: Panel regression results

Fixed-effects (within) regression Number of obs = 40

Group variable: id1 Number of groups = 8

R-sq: within = 0.6127 Obs per group: min = 5

between = 0.5323 avg = 5.0
overall = 0.5728 max = 5

F(3,29) = 15.29
corr(u_i, Xb) = -0.2815 Prob > F = 0.0000

roa Coef. Std. Err. t P>|t| [95% Conf. Interval]

operatingactivities .3788279 .5671062 0.67 0.509 -.7810345 1.53869

investingactivities -.3091019 .047652 -6.49 0.000 -.4065612 -.2116426
financingactivities -.0629679 .9438074 -0.07 0.947 -1.993271 1.867335
_cons -.0787844 .4414495 -0.18 0.860 -.9816501 .8240813

sigma_u .50873123
sigma_e .74816057
rho .31617729 (fraction of variance due to u_i)

F test that all u_i=0: F(7, 29) = 1.34 Prob > F = 0.2694

Source: Study Data (2022)

ROAit=-0.787844+0.3788279OperatingActivitiesit-0.3091019InvestingActivitiesit-
0.0629679FinancingActivitiesit + ε
The findings show that the combined influence of independent variables was determined using the
R Square (0.5728) which implies that the independent variables in the model had 57.28%
determination of manufacturing firms’ financial performance, which was statistically significant
evidenced by the p value 0.000˂0.05. There was only 42.72% of the outcome of Return on Asset,
which could not be explained by the variables in the model, hence could only result from other
variables beyond the scope of the study.

In the absence of explanatory variables, the ROA of manufacturing firms increased by -0.787844
which is insignificant at a p value of 0.860. The findings show that a unit increase in cash flow
management from operating activities would lead to 0.3788279 increase in ROA. A p-value of 0.509
˃0.05 meant that cash flow management from operating activities was insignificant predictor of
manufacturing firms’ financial performance. Therefore, based on the first H01 ‘cash flow
management from operating activities has no significant effect on financial performance of
manufacturing firms’ in Kenya’ is therefore not rejected. These findings contradict those by Frank
& James (2014) who evaluated the connection between operating cash flow activities and corporate
performance in Nigeria's food and beverage industry and found a strong correlation between
operational cash flows and corporate performance in Nigeria's food and beverage industry.

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A unit increase in cash flow management from investing activities would lead to -0.3091019
increase in ROA, with a p-value 0.000˂0.05, an indication that cash flow management from
investing activities had a statistically significant influence on manufacturing firms’ financial
performance. Therefore, the second H0 ‘cash flow management from investing activities has no
significant effect on financial performance of manufacturing firms’ in Kenya’ is hereby rejected.
These findings agree with the findings by Rehaman (2017) who investigated the profitability of a
Pakistani company's cash-flow through investing operations and found that profitability is impacted
by net investment cash flows.

Furthermore, a unit increase in cash flow management from financing activities would lead to -
0.0629679 decrease in ROA with a p-value of 0.947˃0.05, hence being insignificant predictor of
manufacturing firms’ financial performance. The third H03: ‘there is no significant effect of cash
flow management from financing activities on financial performance of manufacturing firms’ in
Kenya’ was therefore not rejected. These findings contradict the findings by Gravetter in 2016 who
evaluated the profitability and financing cash-flows of SMEs in California and found that changes
in long-term obligations or debt, changes in owner's capital, and changes in dividends all influences
the financial performance. On the other hand it agrees with the findings by Bragg (2014) who
investigated the correlation between financing cash-flows and corporate effectiveness in the London
Stock Exchange-listed corporations and concluded that financing cash flows should be utilized in
relation to funds arising from equity, debt issuance, dividend payment, debt repayment, and share
repurchase.

The conclusion of the study is based on the empirical findings of the study. The first objective was
to determine the effect of cash flow management from operating activities on financial performance
of manufacturing firms’ in the Kenya. In respect to this, the study concluded that the effect of cash
flow management from operating activities on financial performance is statistically insignificant.
The researcher concludes that cash flow management from operating activities has no much
importance to the contribution of financial performance of manufacturing firms’.

In regards to cash flow management from investing activities, the study concludes that to cash flow
management from investing activities is not well distributed across the manufacturing firms’, with
a few manufacturing firms’ having high cash flow management from investing activities and the
majority not being so. The research concludes that cash flow management from investing activities
has a significant influence on the financial performance of manufacturing firms’ in Kenya.

In regards to cash flow management from financing activities, the researcher found that the cash
flow management from investing activities did not have a statistically significant effect on the
manufacturing firms’ financial performance. Therefore, the study concludes that generally, cash
flow management from financing activities is not an important factor when evaluating the financial
performance of manufacturing firms.

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The policy recommendations of the study are based on the variables with significant effect on
financial performance of manufacturing firms in Kenya. The study found that cash flow from
investing activities was negatively and had statistically significant effect on financial performance
of manufacturing firms in Kenya. Hence, the study recommends that manufacturing firms should
adhere to cash flow from investing activities by investing in the most efficient capital intensive
assets that very low cash flow outflow in terms of maintenance but enhance operational efficiency.

The study suggest another study to be conducted featuring the same variables, but now using Return
on Equity as the dependent variable. The study further suggests a similar study to be carried out in
other sectors.

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