Effect of Cash Ratio on Financial Performance of Agricultural Firms Listed at the Nairobi Securities Exchange, Kenya

Abstract

The study was informed by the continuous decline in financial performance of the agricultural firms listed at the Nairobi Securities Exchange, Kenya. The study emanates from the Doctoral dissertation of the first author in which the co-authors served as supervisors. A census approach was adopted where secondary data from audited annual financial reports of all the six Agricultural firms listed at the Nairobi Securities exchange, Kenya was used, covering the period 2015 to 2022. Descriptive analysis and panel regression analysis were applied. Based on the outcome of the panel regression analysis, the study established that cash ratio has significant effect on financial performance of the Agricultural firms listed at the Nairobi Securities Exchange, Kenya. The study recommends that agricultural firms listed at the Nairobi Securities Exchange need to improve on their cash and cash equivalents holdings so as to easily address current liabilities when due. This will in turn sustain the financial performance of agricultural firms listed at the Nairobi Securities Exchange, Kenya. Additional research can be done using a different method of analysis to further investigate the relationship between cash ratio and financial performance of agricultural firms listed at the Nairobi Securities Exchange, Kenya. Keywords: Agricultural Firms, Cash Ratio, Financial Performance, Liquidity Preference Theory and Stewardship Theory