Abstract:
The purpose of the study was to establish the effects of working capital management on
liquidity of classified hotels in Eldoret Town -Kenya, the study sought to address the
following specific objectives: to establish how Cash management affects liquidity of hotels
in Eldoret- Kenya, determine the effects of Receivables management on liquidity of hotels
in Eldoret, establish the effects of Inventory management on liquidity of hotels Eldoret-
Kenya and establish the effects of Payables on liquidity of classified hotels in Eldoret
Kenya. The target population of the study was 12 classified hotels in Eldoret Town. A
sample of 129 respondents was selected using Yamane technique of sampling in all the 12
hotels and to group the respondents into eight strata. This study used primary data. Data
collection methods used included use of questionnaires. To determine the reliability of
research instruments a pilot study was conducted before the actual data collection and
further split half method was carried out to calculate Cronbach alpha. Data was analyzed
quantitatively and presented descriptively and illustrated by use of tables. In particular,
descriptive statics such as means, standard deviations, and frequencies were used to analyse
data, also inferential statistics multiple regression was used. The financial data covered a
period of 6 years (2004-2011) this period has been chosen on the belief that it is long enough
to aid the study formulate reliable conclusions.The findings of the study indicated that all the
four predictor variables; Inventory management (β = 0.134, p < 0.037), Accounts
Receivables management (β = 0.173, p < 0.043), Accounts Payables management (β =
0.259, p < 0.002), and Cash management (β = 0.422, p < 0.000) showed a positive
significant effect on the dependent variable Liquidity of classified Hotels. This study
recommends that there is need for hotel managers to create value for their shareholders by
ensuring effective and efficient management of debtors, they should negotiate for better
terms of credit with their supplies, managers should put in place effective inventory control
systems to their supply chain department and lastly ensure effective cash management and
working capital practices
