Working capital management, Liquidity and Financial Performance: Context of Kenyan SME's

Abstract Working capital is all about management of short-term assets and liabilities of an organization in order to enhance profitability and avoid insolvency situations. This paper appraises the linkage between working capital management, liquidity and financial performance in Kenya with a keen interest on small and medium enterprises. The analysis is based on the desk review of the literature surrounding the stated subject area. One of the observations that was made was that poor working capital management can lead to collapse of even the most profitable corporations. Most of the literature analyzed clearly observes that, there is a close connection between working capital management and profitability. Liquidity, firm size, leverage and other financial ratios are also important factors which form part of working capital management