Effect of Cost of Inventory on Operating Cash Flow of Private Hospitals in Kisumu County, Kenya

Abstract

The aim of this study was to establish the effect of cost of inventory and operating cash flow. The study adopted the correlational research design to achieve its aim and objective. The target population was 32 private hospitals in Kisumu County for a 7-year period between 2015 and 2021. The researcher used secondary data from the hospitals' audited financial reports. Panel data methodology with 196 data points was used to establish the relationship between the independent and dependent variables. The study used descriptive and inferential statistics to analyze the data. Correlation and regression were used for hypothesis testing at 95% confidence level. Diagnostics tests were done to determine the viability of the study:

• Normality tests,
• Heteroscedasticity tests, and
• Multicollinearity tests

The results showed (p=0.00, β=0.9021) for the inventory cost; hence the null hypothesis was rejected. The analysis established a strong positive and significant correlation between cost of inventory and operating cash flow. The relationship of specific components of the operating cash flow that can help corporate entities invest appropriately and adequately in their current and fixed assets should therefore be pursued in further studies.