Working Capital Management and Profitability of Industrial Goods Sector in Nigeria

Abstract

This study investigated the relationship between working capital management and profitability of industrial goods sector in Nigeria. Specifically, the variables of working capital management namely: Cash Conversion Cycle (CCC), Current Ratio (CR), Quick Ratio (QR) and Working Capital Turnover ratio (WCTR) and Return On Assets (ROA) were examined. Firms in the industrial goods sector were selected and their data sourced from the Nigerian Stock Exchange Factbook (2011-2020) and seventy (70) observations were obtained. The study revealed from the regression analysis carried out that a positive linear relationship exist between the variables of working capital management (CCC, CR, QR and WCTR) and ROA. CR was negatively and significantly related with ROA while, CCC and QR was positively but insignificantly related with ROA.WCTR shows a negative and insignificant relationship with ROA when tested at 0.05 level of significance. Based on the findings, it is recommended therefore, that listed industrial goods firms should adopt the management of their short term financial strength in boosting profitability.