EFFECT OF WORKING CAPITAL MANAGEMENT ON THE PROFITABILITY OF LISTED INDUSTRIAL GOODS COMPANIES IN NIGERIA

Abstract

There has been a debate as to whether Working Capital Management plays an integral role in the profitability of firms. Some has argued in favour of while others are of the opinion that it has no relationship with profitability. This research work attempts to investigate the effects of working capital management on the profitability of listed industrial goods companies in Nigeria. The research adopted the use of secondary data spanning a period of 11 years from 2010 to 2020. Descriptive statistics technique and Stata 14 were employed to analyse the secondary data collected from the financial statement of the 10 sampled companies. The researcher proxied Profitability by Return on Assets (ROA) which was regressed against the independent variable Working Capital Management proxied by Inventory Turnover Ratio (ITR) using the ordinary least square technique and Cash Conversion Ratio as control variable respectively. The study adopted the ex-post factor research design. Ten firms were sampled out of sixteen (16) industrial goods companies using convenient random sampling techniques, panel data analysis was used to analyze the research hypothesis to facilitate decision making based on the outcomes of the research findings. The result shoved that inventory turnover ratio has a negative and significant relationship with return on asset. Based on the result of the hypothesis the researcher recommended that management of industrial good firms in Nigeria should maintain a very strict policy as regards working capital management for a better performance.