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Working Capital Management and Return on Assets: A Panel Data Analysis of Nigerian Manufacturing Companies

Ajibade, Ayodeji T, Ikpeoha-Felix, Ngozi Uloaku

Abstract

The issue of profitability cannot be overemphasized because it is the life wire of every business. Manufacturing companies in Nigeria are faced with the issue of poor profitability. Working Capital Management plays a major role in the success of businesses because of its impact on profitability. The main objective of this study is to examine the effect of working capital management on the return on assets of selected manufacturing companies in Nigeria. The study adopted the ex-post facto research design, the population of the study consists of twenty (20) selected manufacturing companies Quoted on the Nigerian Stock Exchange, sample size was determined using purposeful sampling technique, and sixteen (16) companies made up the sample size for the study. Data were obtained from secondary sources-from annual reports of the selected manufacturing companies for the period (11) years from (2010- 2020). The study revealed that working capital management has a significant effect on return on asset of selected manufacturing companies in Nigeria (F-Statistics = 20.59, p = 0.0004). Therefore, from the findings of the study, it was concluded that working capital management is a significant determinant of profitability of selected manufacturing companies in Nigeria. The study recommended that working capital management should be properly applied and that the managers of the selected manufacturing companies should pay more attention to their inventory conversion days, account receivable days and account payable days in order to maximize their profit. Key Words: Manufacturing Firms, Working Capital Management, Profitability, Return on Assets.

Keywords

Manufacturing FirmsWorking Capital ManagementProfitabilityReturn on Assets.

References

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