Abstract
The study examines the effect of working capital management on the profitability of consumer goods companies listed on the Nigerian Stock Exchange. Specifically, the study sought to determine the extent to which number of days account receivables, inventory, and number of day of account payable affects return on asset (ROA) of consumer goods companies on the NSE. The populations for the study consist of consumer goods companies listed on Nigerian Stock Exchange. The study covers a period of 5 years from 2014-2018. Data collected were analyzed using multiple regression analysis via the Statistical Package for Social Science (SPSS) version 20. The study reports a negative and insignificant influence of trade receivable collection period and trade payable payment period on ROA while inventory conversion period has a positive insignificant effect on ROA of consumer goods companies. Therefore, it is concluded that working capital management has insignificant effect on companies’ profitability in consumer goods companies in Nigeria. The study recommends that companies should adopt a policy of prompt collection of debts, ensure adequate liquidity by ensuring current assets exceed current liabilities. Keywords: Working Capital, Profitability, Accounts Trade Receivable Collection Period, Trade Payable Payment Periods, Inventory Conversion Period DOI: 10.7176/RJFA/11-18-14 Publication date: September 30 th 2020
Highlights
The primary goal of any financial manager is to maximize profit and without this, the going concern of any business operations would be threatened in the long run
Working capital management is significant to a company and this is usually explained by the relationship between working capital management and profitability (Oladipo & Okafor 2013)
6.0 Conclusion and Recommendations 6.1 Conclusion This paper examines the effect of working capital management on the profitability of listed consumer’s goods companies in Nigeria
Summary
The primary goal of any financial manager is to maximize profit and without this, the going concern of any business operations would be threatened in the long run. Managers are continuously adopting and adapting business strategies to improve profitability to an acceptable level. Of such strategies is the composition of assets and liabilities in the statement of financial position as well as quality of decisions made in this respect (Pandey, 2005). Working capital management is significant to a company and this is usually explained by the relationship between working capital management and profitability (Oladipo & Okafor 2013). They were of the opinion that working capital is important to the financial health of businesses organization of all sizes
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