Determinants of Cost of Capital: Kenyan context

Kengere, George Onyiego; Manasseh Njagi,; Chonga, Patricia Luvuno; Kamau, Charles Guandaru

doi:10.59413/eajf/v1.i1.1

Cited by 4 publications

(2 citation statements)

References 11 publications

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“…These distortions prompt banks to shift the tax burden onto their customers, which consequently leads to alterations in interest rates, thereby impacting the profitability of businesses. Kengere et al (2023) have posited that the cost of capital is influenced by several factors. Among these factors are profitability, growth, tax shield, liquidity, and the unpredictability in cashflow.…”

Section: Empirical Literature Reviewmentioning

confidence: 99%

Relationship between increased Taxation and Financial Performance of Kenyan Firms

Aringo

2023

AJOCS

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Taxation plays a critical role in financing government activities, public services, and economic development. This study focuses on examining how taxation impacts the financial performance of firms in Kenya. The complex interplay between tax policies and financial outcomes is multifaceted, and understanding these dynamics is crucial for effective tax strategies and financial optimization. The theoretical frameworks of "Ability to Pay Theory," "Classical Taxation Theory," and "Political Power Theory" are explored to provide insight into the relationships between taxation and business performance. These theories help us understand how tax rates, incentives, and political influences can affect firms' profitability, investment, and overall financial performance. By reviewing existing literature and conducting empirical research, this study aims to shed light on the specific challenges and opportunities that taxation presents to businesses in Kenya. The study observed that the influence of taxation on the financial performance of Kenyan firms is significant and multifaceted. Understanding the effects of customs duty, PAYE, and VAT is crucial for informed decision-making and effective management of financial resources in the business environment. Further research should explore the specifics of these impacts and potential mitigating measures.

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Section: Empirical Literature Reviewmentioning

confidence: 99%

Relationship between increased Taxation and Financial Performance of Kenyan Firms

Aringo

2023

AJOCS

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“…In their study, Millan, Kamau, and Ibua (2023) emphasized this premise. Furthermore, as pointed out by Kengere et al (2023), it is crucial to keep in mind that several factors, including expansion, tax shield, liquidity, instability in cash flow, and profitability, could significantly affect the cost of capital. Henceforth, it is evident that upholding a superior degree of fluidity is intricately connected to a corporation's profitability, highlighting the significance of executing efficient currency administration tactics.…”

Section: Introductionmentioning

confidence: 99%

Effect of Cash conversion Cycle on Profitability: A case study of Binathman Household Supermarkets in Kenya

Ruguru

2023

SSMJ

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The objective of this research study is to investigate the relationship between the cash conversion cycle (CCC) and profitability in the context of Binathman Household Supermarket in Mombasa County. The study examines how the management of receivables, cash, payables, and inventories impact the supermarket's profitability. The literary examination scrutinizes antecedent research investigations that have explored the connection between managing working capital and profitability in various sectors. Theoretical frameworks, for example, the operating cycle theory and the trade-off theory of liquidity, give important insights into the variables that influence decisions on working capital and their impact on profitability. The study utilizes multiple linear regression analysis to evaluate the effect of inventory conversion, receivables conversion, and payables conversion on profitability. The study employs secondary data and measures profitability through return on assets (ROA). The research findings indicate a significant negative relationship between the cash conversion cycle and profitability. A shortened CCC leads to increased profitability by improving cash flow, reducing financing costs, and enhancing operational efficiency.

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Credit Cost Management and Financial Performance of Hotel Businesses in Kenya

Asuga

2024

AJOCS

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This study explores the impact of credit cost management on the financial performance of businesses in Kenya's hospitality sector. Specifically, it examines how interest rates, loan collateral, and loan repayment terms influence the profitability and financial stability of small and medium-sized enterprises (SMEs) in the industry. The study is supported by Loanable funds theory, Credit scorecards theory and Tradeoff theory. Through a desk review of existing literature, the study identifies that high interest rates increase the cost of borrowing, creating financial pressure on businesses, while lower rates support profitability. Loan collateral is found to be a major determinant of access to credit, with businesses that provide sufficient collateral securing loans more easily. Flexible loan repayment terms contribute to better cash flow management and liquidity, improving overall financial performance. The study concludes that effective credit cost management is critical for the success of hospitality businesses and recommends that financial institutions and policymakers collaborate to provide more favorable credit terms, including lower interest rates, reduced collateral requirements, and more flexible repayment options. Increased transparency in loan agreements and government interventions to support SMEs are also essential for fostering financial growth in the sector.

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Determinants of Cost of Capital: Kenyan context

Cited by 4 publications

References 11 publications

Relationship between increased Taxation and Financial Performance of Kenyan Firms

Relationship between increased Taxation and Financial Performance of Kenyan Firms

Effect of Cash conversion Cycle on Profitability: A case study of Binathman Household Supermarkets in Kenya

Credit Cost Management and Financial Performance of Hotel Businesses in Kenya

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