Abstract
This study conducted a comparative analysis on working capital management and performance ofindustrial and consumer goods firms in Nigeria. Precisely, the study compared effect of average collectionperiod and average payment period on return on capital employed of selected industrial goods and consumergoods firms. 20 firms were randomly selected over a period of 10 years data were collected from annualreport of the firms. This study used static data analyses to analyze data. Result showed average collectionperiod and average payment period exert insignificant positive effect on return on capital employed ofindustrial goods firms, while both average collection period and average payment period exert insignificantnegative effect on return on capital employed of consumer goods firms. Independent t-test result showedsignificant mean difference between coefficient estimate corresponding to industrial and consumer goodsfirms. This study concluded that there exists significant difference between the effect of working capitalmanagement on performance of industrial goods firms and consumer goods firms when performance ismeasured in terms of return on capital employed. Hence firms in both sub-sectors should be strategic whenmanaging working capital, by setting higher average payment period in a manner that will not crowd-outtheir credit worthiness.
Highlights
In business, especially manufacturing sector, effective working capital management is a means of enhancing performance, in order to gain competitive advantage in the manufacturing sector
The study employed correlation and regression analysis models for analyzing data and result of the analysis revealed that, there is no significant relationship between cash conversion cycle and performance measures and the study concluded that manufacturing firms in Sri Lanka should follow conservative working capital management policy
Test results presented in tables 4, 5 and 6 revealed that, there is significant difference between the effect of working capital management on performance of industrial good firms and consumer good firms when performance is measured by return on capital employed
Summary
Especially manufacturing sector, effective working capital management is a means of enhancing performance, in order to gain competitive advantage in the manufacturing sector. Effective and efficient working capital management is needed to achieve performance. As witnessed in Nigeria, many manufacturing firms are shutting down among other factors, owing to poor working capital management. Few examples of such manufacturing firms are, Kastina steel, Aba textile mill Ltd, Golden guinea breweries Umuahia and Ajaokuta steel complex which reduced its staff from 5000 to 1000 in year 2008 (Jegede, 2017). This study was motivated by the evident problems of improper management of working capital components and the need for improve performance of the manufacturing sector in Nigeria, in the face of economy challenges as pointed out by Jegede (2017), the performance of the manufacturing sector
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