| dc.description.abstract | Small and medium enterprises operate in all segments or sectors of the economy in Kenya. They are
in a high risk since they face challenges of liquidity management which in turn might have great
impact on profitability. In another point of view small and medium-sized enterprises (SMEs) in
Kenya commonly have distinctive features: they are small in scope, have great probability of
insolvency, great aptitude to alter the nature of their resources or assets and less transparency in the
information provided to creditors. Due to this, in case of inadequate finances SMEs may have
complications in accessing external funding, therefore edging their investment alternatives and
probably leading
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severe falls in performance in wide-range and profitability in particular. Therefor
this study aimed to establish whether there is statistically a substantial relationship between liquidity
and profitability on SMEs in Embu County. It reviewed theories of working capital management
developed by various scholars as well as researches which have been carried out on liquidity and
working capital in the ancient days. These philosophies include; cash conversion cycle, simulation
models, Baumol model and Keynesian theory of money. This research applied a descriptive research
design. This design chiefly emphasized on determining the magnitude to which two variables relate
and frequency of occurrence. Furthermore it was ordinarily concerned with delineating a population
in accord to crucial variables, explaining relationships, and fact finding of various kinds. The
population of consideration in this research composed of registered small and medium size firms and
establishments operating in Embu County Kenya. The population encompassed SMEs from different
sectors such as catering, banking, retail and wholesale and others. The study used secondary data
which was collected from the financial reports of the enterprises selected. Two types of data analysis
were applied i.e. quantitative and descriptive analysis. The research findings concluded that
liquidity, leverage, and size have a positive but insignificant effect on profitability of SM Es in Embu
County. Furthermore the results found that growth of the firms has a positive and significant effect
on the profitability of SM Es in Embu County. | en_US |
