INFLUENCE OF FINANCIAL MANAGEMENT PRACTICES ON RETURNS A CASE OF MOLOLINE SERVICE LIMITED IN NAKURU MUNICIPALITY

Abstract

Financial Management practices are vital in any investment, given that there are many investment opportunities available in Kenya. The role of financial management practices on the returns of organizations has not been clearly understood. This study aimed at investigating the influence of financial practices with respect to financing and agency decisions on the returns and find out the extent to which these practices are utilized in the matatu industry. The study concentrated on the cost of capital, capital structure, agency decisions and the cost of operations. Significance of the study was to create awareness to investors and help them in financial management practices, add to the existing knowledge and help government in policy formulation. The survey research design was employed where collection of primary data was through questionnaire and the respondents were selected through a stratified random sampling. Data was analyzed using descriptive statistics, correlation, factor analysis and regression. The study found out higher preference for the equity capital. Debt financing is also used but on a smaller scale. The decision to use debt is largely influenced by its cost and the attendant risk, that is, the potential of not covering the debt from the cash flows from operations. The study recommends that, Mololine Service Limited should seek new ways of making it possible for members to access loans at lower rates by, for instance, entering into funding commitments with the financial institutions and also higher degree of vigilance in terms of monitoring should be considered by the organizations. Therefore mechanisms should be put in place to ensure good financial management practices.