Abstract

The influence of credit management methods on the liquidity and profitability of listed industrial goods firms in Nigeria was investigated in this study. It was decided to use a descriptive survey study design. The sample population for which copies of the questionnaire were distributed was 400 respondents, representing 65% of the population. The participants provided 355 valid responses, which were examined. For descriptive statistics, one-way ANOVA was utilized, and to test the hypotheses, a basic regression analysis method was applied. The results showed that the credit risk assessment, debt recovery strategy, and receivable collection policy sub-variables have a positive and statistically significant impact on the liquidity sub-variables - ability to pay, level of bad debt, and cash inflow. Liquidity had a positive and statistically significant effect on profitability. The study thus, suggest that companies in the industry should enhance their liquidity in order to achieve the targeted profit level by having effective credit terms and proper risk assessment strategy, designing and implementing debt recovery plans to aid collection of the overdue debt, adopting a stringent credit collection method, and employing and retained qualified accountants and credit administrators with excellent knowledge of credit control techniques.

Highlights

  • For quite a long time marketing professionals have recognized that giving credit is one of the tactics used by businesses to increase sales volume

  • The results showed that the credit risk assessment, debt recovery strategy, and receivable collection policy sub-variables have a positive and statistically significant impact on the liquidity sub-variables - ability to pay, level of bad debt, and cash inflow

  • The study suggest that companies in the industry should enhance their liquidity in order to achieve the targeted profit level by having effective credit terms and proper risk assessment strategy, designing and implementing debt recovery plans to aid collection of the overdue debt, adopting a stringent credit collection method, and employing and retained qualified accountants and credit administrators with excellent knowledge of credit control techniques

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Summary

Introduction

For quite a long time marketing professionals have recognized that giving credit is one of the tactics used by businesses to increase sales volume. It serves as a critical marketing link for the transportation of goods from manufacturing to distribution to a large number of customers who cannot pay right away. The economic worth of the items flows to the buyer at the time of purchase, but the seller anticipates receiving an equivalent amount at a later period. Credit sales imply both current and future transactions, posing a receivable risk that must be carefully assessed and handled. Credit is unavoidable in any business circle, yet it remains a threat to any company's financial health and performance (Agu & Basil, 2013; Nwanna & Oguezue, 2017)

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