Working Capital Management and Financial Performance: Evidence from Nigeria’s Public Listed Manufacturing Companies

Abstract

Working capital management is important in corporate finance and considerably impacts organizational profitability. The study investigates how working capital management impacts the performance (specifically in the context of financials) of publicly traded manufacturing companies listed on the Nigeria Stock Exchange (NSE). Data collected for this study was analyzed using Statistical Package for Social Sciences (SPSS) based on the sample of 18 manufacturing companies for five years from 2013 to 2017. Working capital management is important for all organizations as it can considerably impact profitability and financial performance. The linear regression study revealed a notable positive correlation between the Account Payable Period and profitability. An escalation in the duration of accounts payable is associated with increased profitability. The second regression model conclusion indicates that a reduction in the duration (days) to collect sales from consumers is linked to a reduction in the profit since accounts receivable are negatively and insignificantly correlated with profitability. The third discovery in this study revealed an insignificant adverse relationship between the conversion period for inventory and profitability. Manufacturing companies need to turn their inventory into sales to increase profits promptly.  This analysis revealed an insignificant inverse correlation between the conversion cycle for cash and profitability.