A Review of Free Cash Flow Hypothesis on the Investment Firms Listed in Kenya
Journal Title: IOSR journal of Business and Management - Year 2019, Vol 21, Issue 1
Abstract
Free cash flowsrefer to the amount of cash available to a firm net of expenses, including capital expenditure.It is the difference between cash flows from operating activities and cash flows from investing activities (Afrasiabishani, Amadinia, & Hesami, 2012). The quantum of free cash flows is ascertained by adding the changes in fixed assets and working capital to the comprehensive profit. Thegeneral objective of this research was to evaluate the association between free cash flowsand the financial performance of listed investmentfirms in Kenya. Specifically, the study sought to address the effect of free cash flows on the return on assets of a firm. Descriptive and causal research design was used to assess the association between the free cash flows and the return on assets. The study population consisted of all the five investment firms listed at the Nairobi Securities Exchange as at 31st December 2017.The audited financial statements of the 5 listed investment firms in Kenya used in this study covered a seven-year period from 2011-2017. Since the number of the targeted firms was small, and secondary data used in the study was readily available from these firms’ websites and the security market’s research handbooks.Data used in the study was collected using a checklist. Descriptive and inferential statistics was used to analyze and present data. The results of the study showed that the relationship between free cash flows and return on assets was statistically significant at r=0.87 with a pvalue of 0.00 compared to 0.05 level of significance.
Authors and Affiliations
Francis Mambo Gatumo, Kizito Ojilong’ Omukaga
Keywords
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- DOI 10.9790/487X-2101025355.
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