Effects of External Factors on Organisational Cash Flow: Evidence From Ghana

Abstract

Effective cash flow management is essential in achieving the goals of every organisation. Businesses will fail to survive without efficient cash flow management. Existing literature reveals that key performance indicators of every organisation is influenced by forces in its external environment. The main objective of this study was thus to examine the effect of external factors within an organisation’s environment on the organisation’s cash flow.

Random effect model was used to examine the relationship between key external factors organisational cash flow. The paper established that external factors had a significant impact on organisational cash flow. The paper further established that some external factors had some level of significant impact on cash flow. Taken as set, key external factors examined had little influence on variance in organisational cash flow position. Unemployment rate and Gross Domestic Product (GDP) growth rate were found not to have significant influence on organisational cash flow, while consumer price index was found to have a significant positive relationship with organisational cash flow.

The paper recommends professionals and scholars in corporate finance management to analyse the effect of external factors on organizational cash flow when developing cash flow strategies.