INFLUENCE OF RECEIVABLES COLLECTION PERIOD ON PROFITABILITY OF TEA FACTORIES IN MERU COUNTY, KENYA

Abstract

This study was undertaken to investigate the influence of receivables collection period on profitability of tea companies in Meru County, Kenya. The census method was used to study the population of all the seven tea factories in the County. Several literatures relevant to this study were reviewed with a view of isolating research gaps. The study used descriptive research design as this is an effective tool for application of cause-effect statistical methods such as regression analysis. For this purpose, the simple linear regression analysis was used to describe the nature of the relationship between receivables collection period and the profitability. This regression analysis was based on a five year period starting from the year ended 2010 to the year ended 2015. Pearson’s correlation coefficient and ANOVA were used to confirm or reject the hypothesis. It was found that receivables collection period had negative effect on the profitability. This implies that shortening this duration improves profitability.