Abstract
Financial performance reflects the extent to which a firm generates value for its stakeholders by efficiently utilizing resources to achieve long-term profitability and sustainability. Within the manufacturing and allied sector at the Nairobi Securities Exchange (NSE), financial performance has become increasingly important due to declining profitability, firm suspensions, and persistent financial instability. This study sought to establish the influence of trade and other receivables and inventory on the financial performance of manufacturing and allied firms listed at the NSE. The study was anchored on the Resource-Based View Theory and Operating Cycle Theory. A descriptive research design was adopted, covering all eight manufacturing and allied firms listed on the NSE as of December 2024. A census approach was employed due to the manageable population size. Secondary data were obtained from audited and published financial reports sourced from the NSE and Capital Markets Authority (CMA) websites for the period 2015–2024. Data were analyzed using descriptive statistics and fixed-effects panel regression analysis at a 95% confidence level. The findings revealed that trade and other receivables had a positive and statistically significant effect on financial performance (β = 0.53982, p = 0.0005), indicating that effective receivables management enhances firm performance. Similarly, inventory exhibited a positive and statistically significant influence on financial performance (β = 0.47746, p = 0.0078), suggesting that maintaining optimal inventory levels contributes to improved operational efficiency and profitability. The study concludes that both trade and other receivables and inventory are important determinants of financial performance among manufacturing and allied firms listed on the NSE. The findings provide useful insights to managers in developing effective credit management and inventory control strategies aimed at improving profitability, liquidity, and overall firm performance.
Key Words: Trade and Other Receivables, Inventory, Financial Performance, Current Asset Structure, Manufacturing Firms, Nairobi Securities Exchange, Resource-Based View Theory, Operating Cycle Theory.