Relationship Between the Cash Conversion Cycle and the Profitability of Manufacturing Firms in Nigeria

Tyohen Terhile James PhD

doi:10.56201/jafm.vol.12.no9.2026.p203.211

📄 Download Paper

Relationship Between the Cash Conversion Cycle and the Profitability of Manufacturing Firms in Nigeria

Tyohen Terhile James PhD

Abstract

This study examined the relationship between cash conversion cycle and firms’ profitability, with specific focus on accounts receivable period and inventory period among selected manufacturing firms in Nigeria. The study was motivated by the need to understand how the management of funds tied up in receivables and inventory relates to firms’ financial performance. An ex-post facto research design was adopted using secondary financial data obtained from the audited annual reports of five selected manufacturing firms listed on the Nigerian Exchange Group for the period 2020–2024. Descriptive statistics, Pearson correlation and multiple regression analysis were employed using SPSS 26.0 and EViews 13. Profitability was measured using Return on Assets , while accounts receivable period and inventory period were used as measures of working capital management. The findings revealed that accounts receivable period had a negative and significant relationship with profitability (β = −0.0031, p = 0.015). Inventory period also had a negative and significant relationship with profitability (β = −0.0018, p = 0.049). The study concluded that prolonged receivables collection and inventory holding periods are associated with reduced profitability among the selected manufacturing firms. It recommended that manufacturing firms strengthen credit control and debt recovery procedures and adopt effective inventory planning, monitoring and stock control practices. These measures can reduce funds tied up in receivables and inventory and contribute to improved profitability.

Keywords

Cash Conversion CycleAccounts Receivable PeriodInventory PeriodProfitabilityWorking Capital ManagementManufacturing Firms.

References

Adeyemo, K. A., & Okagbue, S. C. (2026). Working capital management and financial performance of listed manufacturing firms in Nigeria. EPRA International Journal of Economics, Business and Management Studies, 13(2). Echor, J., & Lohor, F. K. (2024). Effect of working capital management on the performance of quoted manufacturing companies in Nigeria. Lafia Journal of Economics and Management Sciences, 9(1), 220–239. Faruna, M., & Okonkwo, O. (2025). Effect of working capital management on profitability of listed industrial goods companies in Nigeria: The moderating role of firm size. Global Journal of Applied, Management and Social Sciences, 32, 169–189. Flach, A. (2025, September 4). Working capital and the cash conversion cycle: Definition, calculation & considerations. Working Capital Hub. Jummai, N. H. (2025). Effect of working capital management practice on the financial performance of manufacturing firms in Nigeria. International Journal of Accounting, Management and Economic Review, 1(3), 332–342. Kademi, I. S., Alias, N., Haron, N. H., & Sadique, R. B. M. (2024). Working capital management and financial performance: Evidence from Nigeria’s public listed manufacturing companies. Accounting and Finance Research, 13(2), 142. Kumari, A., Munda, P., & Srivastava, S. (2025). Financial determinants of profitability in Indian manufacturing firms: A quantile and sectoral regression approach. Economic Sciences, 21(6S), 128–138. Müller, L. (2025, October 6). Cash conversion cycle: Definition, formula and limitations. MREI. Nwdighoha, L. E. (2024). Working capital management and financial performance of listed industrial goods manufacturing companies in Nigeria. BW Academic Journal. Ojum, E., & Chukwu, G. J. (2025). Trade receivables management and profitability of consumer goods manufacturing firms in Nigeria. International Journal of Innovative Finance and Economics Research, 13(1), 294–302.

Relationship Between the Cash Conversion Cycle and the Profitability of Manufacturing Firms in Nigeria

Abstract

Keywords

References

More Articles from JOURNAL OF ACCOUNTING AND FINANCIAL MANAGEMENT