WORKING CAPITAL MANAGEMENT AND THE PERFORMANCE OF LISTED MANUFACTURING FIRMS IN NIGERIA

Abstract

Large number of corporate failures is attributable to inappropriate management strategies or controlling working capital management components as it relates to profitability. This study examines the effects of working capital management (WCM) on the profit base of  manufacturing firms in Nigeria from 2012-2021. Data were sourced from annual reports of sampled manufacturing firms quoted on the Nigerian Exchange Group (NGX). The study employed Ordinary Least Square (OLS), descriptive statistics, and correlation matrix to analyse the sourced data. The findings show that there is no significant relationship between current ratio and return on asset of manufacturing firms in Nigeria with a p-value of 0.23. Cash Conversion Cycle revealed a coefficient of -0.04 and p-value of 0.01, indicating a negative impact on ROA which is statistically significant. Thus, there is a significant relationship between cash conversion cycle and return on assets of manufacturing firms in Nigeria. Account payable management have an insignificant negative impact on return on asset of manufacturing firms in Nigeria based on the coefficient -0.01 and p-value of 0.54. The findings show that Account Receivable Management was found to be significantly positive associated with Return on Asset with the coefficient 0.03 and p-value of 0.02. More so, manufacturing firms should establish a strong yet mutually beneficial suppliers’ base. Additionally, firms should enforce clear credit policies to ensure timely and efficient collection of receivables. Keywords:  Current Ratio, Cash Conversion Cycle, Account payable management, Account Receivable Management, Return on Asset.