Assessment of the Impact of Cash Flows on Financial Performance of Saving and Credit Cooperative Society Limited in Arusha City Council

Abstract

The aim of this study was to assess the impact of Cash Flows on Financial Performance of SACCOS in Arusha City. Basically it was focused on cash flows – net income and returns on assets. Related literature reviews both theoretical and empirical were reviewed to expand the knowledge about the study. The study was conducted in Arusha City Council where giant SACCOS with sustainable growth are found. It is also one of the potential business centers in Tanzania which bring worth financial services opportunity. Descriptive research design was applied to describe the relationship between variables. Simple random sampling method was used in obtaining samples from the total population. The use of the method reduced biasness and resource utilization in accomplishing the study. Data collection method employed in this study was quantitative data based on Secondary data. It was extracted from financial audited report of the sampled SACCOS to minimize cost and time. Data were analyzed using STRATA, computer software package. Vector Auto Regression Model and Vector Error Correction Model were applied to test for causal relationship and co-integration between variables. The study findings revealed that co-integration exist between Cash Flows – Net Income and Returns on Assets. Findings also revealed that Cash flows – Net Income granger cause Returns on Assets as well as Returns on Assets granger cause Cash flows – Net Income. In this study also revealed that long run and short run causality exists between variables. The Serial correlation and Normality were used to validate models applied in this study. The study validates that Cash flows has significant impact on SACCOS’s financial performance at a given time period.