Abstract
This study examined the impact of working capital management on the profitability of selected quoted agricultural and agro-allied companies (from 2012 to 2016) in Nigeria. Secondary data were extracted from eighteen quoted agricultural and agro-allied companies in Nigeria, four of which are agricultural companies out of the twenty-three in Nigeria. Descriptive research design and regression analysis were used. Working capital management was measured using the trade receivables collection period, trade payables, payment period, inventory turnover period, and cash conversion cycle, while profit before interest and tax measured profitability. This study found that working capital management and profitability are related to the agriculture and agro-allied sector in Nigeria. The result shows the trade receivables collection period and profitability are negatively related. The result also shows the trade payables payment period and profitability are positively related. The result shows that the inventory turnover period and profitability are related, the cash conversion cycle and profitability are positively related. The conclusion is that working capital management and profitability are related. If the management of firms takes efficient and effective decisions in managing the company’s working capital, all things being equal, the maximization of the firm’s profitability, value, and shareholders’ wealth can be guaranteed. Consequently, agency costs asserted by agency theory would be eliminated automatically. AcknowledgmentAll researchers and non-researchers that contributed to this paper are highly appreciated.
Highlights
Working capital management (WCM) involves finding the balance between liquidity and profitability of firms in terms of their liquidity and inventory. Mathuwa (2009) believes that WCM is basically about how companies manage current assets and liabilities. Enyi (2011) agrees that a business is as essential and liquid as its working capital volume
Inventory turnover period and CCC, and operational net profit of companies. He concluded that a more This study aims to examine if WCM and the profextended average day in receivables, average days itability of agricultural and agro-allied firms are in payables, inventory turnover period and CCC related to filling this gap
The conclusion is that working capital management and profitability are related
Summary
Working capital management (WCM) involves finding the balance between liquidity and profitability of firms in terms of their liquidity and inventory. Mathuwa (2009) believes that WCM is basically about how companies manage current assets and liabilities. Enyi (2011) agrees that a business is as essential and liquid as its working capital volume. Working capital management (WCM) involves finding the balance between liquidity and profitability of firms in terms of their liquidity and inventory. Part of the variables used as predictor of the profitability of a firm; this is bea proxy for WCM is the trade receivables collection cause inventories are assets of the firm held for period (TRCP). An essential consideration in trade receiva- converted into cash, the working capital will be ble is credit policy variables This policy comes with tied up in them, thereby restricting the liquidity of two options to offer. Interest of the owners of the business and thereby enhance profitability and shareholder wealth
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