Asset Structure and Profitability Nexus in Nigerian Manufacturing Firms: An Empirical Investigation
Abstract
This study examined the effect of asset structure on the financial performance of Nigerian manufacturing firms between 2014 and 2024, using Net Profit Margin (NPM) as the measure of profitability. The specific objective was to assess how Current Assets to Total Assets Ratio, Fixed Assets to Total Assets Ratio, Inventory to Total Assets Ratio, Receivables to Total Assets Ratio, and Cash and Cash Equivalents to Total Assets Ratio influence NPM. Panel data from five listed manufacturing firms were analyzed using panel least squares regression. The results indicated that only two of the five asset structure components had a statistically significant impact on NPM. Both Current Assets to Total Assets Ratio (? = -1.8828, p = 0.0001) and Fixed Assets to Total Assets Ratio (? = -1.3220, p = 0.0005) exhibited significant negative effects, suggesting that higher concentrations in these assets are associated with lower profitability. In contrast, Inventory Ratio (? = 0.3550, p = 0.2937), Receivables Ratio (? = 0.4519, p = 0.2904), and Cash and Cash Equivalents Ratio (? = 0.0292, p = 0.9383) were statistically insignificant. Descriptive statistics revealed moderate variability in both asset structure and profitability, reflecting operational and financial diversity among the sampled firms. The findings underscore the importance of optimal asset allocation in enhancing profitability, highlighting that internal asset management should be complemented by broader strategic and operational considerations. It is concluded that while asset structure influences financial outcomes, manufacturing firms must adopt integrated performance strategies that account for both internal metrics and external challenges to achieve sustainable profitability.
Keywords
Net Profit MarginCurrent AssetsFixed AssetsInventoryReceivablesCash and
Cash EquivalentsAsset StructureManufacturing FirmsFinancial Performance.
References
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