Working Capital Management and Profitability of Listed Industrial Goods Companies in Nigeria

Abstract

Working capital is the capital needed by a business to finance the day-to-day operations of the business. The purpose of this study is to investigate the impact of working capital management and profitability of listed industrial goods companies in Nigeria. The study was anchored on the cost trade-off theory. The methodology adopted in the study was an ex-post facto research design. The population of the study consist of ten industrial goods companies in Nigeria. Secondary data from ten listed industrial goods companies in Nigeria's stock exchange for the period of ten years (2012-2021) was obtained based on a convenient sampling method. The statistical tools used were multiple regression analysis and Pearson product-moment correlation coefficient aided by SPSS version 22.0. The founding showed a negative significant impact between Inventory, Trade Receivable and Net Profit Margin as well as Return on Asset. Whereas a significant positive impact was observed between the cash conversion cycle and net profit margin as well as return on asset. The study concluded a significant impact on working capital management and profitability of listed industrial goods companies in Nigeria. The study recommends that the credit policy of the companies should be structured in such a way as to improve cash flow thereby reducing the firm cash conversion cycle. Also, professionals should be hired where necessary to ensure efficient management of working capital components to increase profitability.