ABSTRACT:-  The sugar industry contributes about 15 percent to Kenya’s agricultural GDP and supports an estimated 25 percent of the country’s population. Achieving financial outcomes requires an organization to accurately balance its expenditure within the limitations of its income stream. Financial plans and budgets must be flexible enough to allow for spending patterns to be adjusted as needed and be fully aligned to the organization’s strategic and service planning. Memba and Nyanumba, (2013) established that the main causes of financial distress are endogenous variables as compared to exogenous variables. Financial Structure, leverage ratio and cash flow ratios affect the financial performance of the firm. The objective of the study was to assess the influence of financial capability on competitive advantage of sugar companies in Western Kenya. Dynamic Capabilities and Finance theories underpinned this study. The target population was composed of six sugar companies. The study adopted descriptive and correlation research designs. The primary data was collected using a questionnaire pretested for validity and reliability and used a purposive sample survey to obtain the empirical data to determine the linkages between variables. The respondents were 727 senior and middle level managers. Out of 88 questionnaires sent out, 64 questionnaires were received back giving a response rate of 73%. Descriptive and inferential statistics were used to analyze the data. The result of the logit and correlation analyses and hypothesis testing indicated that availability of financial resources does not result in direct competitive advantage of the firm but it depends on how these funds are strategically utilized. With the exception of West Sugar Company, the rest of the sugar firms under study are heavily indebted and insolvent as brought out by the secondary data.. The Government should intervene and establish an environment for the sugar industry to enjoy competitive advantage in the COMESA free trade area.

Key Words:- Strategic Capability, Financial Capability, Capital Structure, Cash flow Ratios, Competitive Advantage.