INFLUENCE OF FINANCIAL MANAGEMENT PRACTICES ON PROFITABILITY OF GOVERNMENT FUNDED YOUTH GROUP BUSINESSES IN KURESOI SUB – COUNTY, KENYA

Abstract

Although generally in Kenya there has been an increase in the promotion of youths owned businesses, not much has been achieved. Past statistics indicate that youth owned businesses exhibit high birth rate and high death rate with 40% of the start- up failing by the year two and at least 60% closing their doors by the fourth year. The objectives of the study was to establish the impact of investment practices, Liquidity practices, financial control practices and financial reporting practices on profitability of government funded youth group businesses in Kuresoi Sub-County, Kenya. The study was based on four theories: modern portfolio Theory, liquidity preference theory, the Theory of Financial Control and Operating Cycle Theory. The target population was 96 top officials from the 32 government funded youth group businesses operating in Kuresoi Sub-County, Kenya. Descriptive study design was adopted inform of a survey while a census survey was employed. Primary data was used which was collected using structured questionnaires. Data was analyzed using descriptive statistics and inferential statistics methods with the aid of SPSS while research hypotheses were tested at 0.05 significant levels with data presented using distribution tables and inferential statistics tables. The research findings indicate that a statistically significant positive relationship between Investment practices and profitability of government funded youth group businesses (β =0.166, p<0.05). The relationship between Liquidity practices and profitability of government funded youth group businesses was positive and statistically significant (β=0.225, p>0.05). There exist a statistically significant positive relationship between financial control and profitability of government funded youth group businesses (β=0.178, p>0.05). Further it was established that there exist a statistically significant positive relationship between financial reporting practices and profitability of government funded youth group businesses (β=0.330, p>0.05). Conclusions were made that investments practices, Liquidity practices, financial control and financial reporting practices have a significance influence with profitability of government funded youth group businesses. It was recommended that youth businesses invest instead of keeping assets idle, so that investments can grow to fight against inflation and future uncertainties. SMEs must be able to respond quickly and efficiently to the market signals to take advantage of investment opportunities and reap the benefits of the diverse local and regional market structure. Recommendations were made that proper liquidity management among government funded youth group businesses will ensure that the youth group business is able to take up business opportunities as they arise. In order to monitor financial position and performance, there is a need for timely and relevant financial statements reflecting what has been achieved; and to effectively plan for the business’s future, there is a need for regular forecasted financial statements to enhance transparency in youth owned businesses.