A Study on the Impact of Cash Management on the Financial Performance of the Listed Manufacturing Companies from Muscat Securities Market, Sultanate of Oman

Abstract

Cash is a valuable yet scarce resource that all businesses have in limited quantity. Present research on cash management has focused on its connection with many important areas such as the effect on the liquidity of the business, its financial performance, bankruptcy, and the overall working capital itself. To validate the relationships between cash management and financial performance, 36 companies listed in Muscat Securities Market (MSM) had been chosen over time, starting from 2014 ending to 2019. For this, the study used cash management ratios, which were the Cash Ratio (CR), Operating Cash to Debt Ratio (OC-DR), and the financial performance ratios are Return on Assets (ROA), Return on Equity (ROE) and Net Profit Ratio (NPR). The CR has a statistically significant positive correlation with ROA of 0.176, ROE of 0.103 and NPR of 0.193 values. The OC-DR also has a statistically significant positive relationship with ROA (0.471), ROE (0.133), and NPR (0.422). The R-square value was 17.8%, where NPR is a dependent variable. When Return on Asset has been taken as a dependent variable, the R-square value was identified as 22.2%. But ROE has a limited impact on the independent variables with 2%. Overall, the main conclusion drawn is that cash management practices used by the Omani manufacturing firms are explaining a significant amount of the financial performance However other relevant factors such as the amount of manufacturing sales contracts received, the social development status of the business, impact of the financial crisis within the economy on the demand of the goods or commodities etc. may influence the cash management practices and draw a better conclusion. The findings can be helpful for policy makers in understanding the main factors that impact cash management and how these factors can be regulated.

Working Capital Management and Financial Performance of Firms Listed under Manufacturing and Allied at Nairobi Securities Exchange, Kenya

“…A p-value of 0.046 was attained which was below 0.05 significance level hence the null hypothesis was rejected and the study found that cash management significantly impacted the financial performance of businesses. This findings align with Chintha and Prasad (2020)…”

“…The companies whose data were collected for the study were all found to have recorded improved financial performances as a result of improvement in their WCM strategies. Chintha and Prasad (2020) supported the findings of Abdikani et al (2018), emphasized that although firms had different approaches in managing their working capital, an objective management practice ultimately improved financial performance. Closer home, Mlambo (2018) investigated how effective debt management practices were in terms of improving the performance of a DHL International (Zimbabwe), and the study found that factoring debts promptly, timely payment plans, follow up as well as rotational debt collection practices improved debt collection in the organization.…”

Effect of Cash Management on the Retail Industry's Financial Performance

“…Given that cash is a valuable resource, any firm must manage it properly and efficiently, which is often done using the method of cash management. According to Sam Sundar Chintha, the definition of cash management is "the management of a firm's cash and cash equivalents to ensure that there is sufficient cash available to support operations, finance investments, and satisfy all other financial obligations [6].…”