EMPIRICAL EXAMINATION OF THE ASSOCIATION OF WORKING CAPITAL MANAGEMENT AND FIRMS’ PROFITABILITY OF THE LISTED FOOD AND BEVERAGES FIRMS IN NIGERIA
Keywords:
Working Capital Management, Average Collection Period, Average Inventory Period, Average Payment Period, Cash Conversion Cycle, Return on AssetsAbstract
The objective of working capital management is to minimize current assets and maximize current liabilities based on the company’s terms of trade without compromising its future profitability and debt payment ability. The study examined the effect of working capital management on the profitability of listed Food and Beverages companies in Nigeria. Correlational research design using secondary data from a sample of ten (10) Food and Beverages firms for a period of Five (5) years (2010-2014) was employed. Using Ordinary Least Squares (OLS) technique of data analysis, the study found that inventory turnover and account receivable have significant positive effect on the profitability of listed food and beverages firms in Nigeria, and that cash conversion cycle and account payable have a significant negative effect on the profitability of listed food and beverages firms in Nigeria. The study recommends among others that management of Food and Beverages companies in Nigeria should decrease period involved in their cash conversion cycle as it will lead to improving the company’s performance in the form of increasing its profit generation and make available a free Cash flow to be distribute to shareholders at the end of company’s accounting period.
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