THE EFFECT OF WORKING CAPITAL MANAGEMENT ON THE PROFITABILITY OF AN ORGANIZATION (A CASE STUDY OF SELECTED QUOTED MANUFACTURING COMPANIES IN NIGERIA)

ABSTRACT

The study empirically assessed the effect of working capital on the profitability of

an organization using selected quoted manufacturing companies across different

industries in Nigeria. The inability

of many organizations to effectively manage their working capital in such a way that it will lead to a sustainable performance has been

identified as the bane of organizational growth in Nigeria. The study applied

ordinary least square i.e multiple regression analysis as its estimating technique. A model that expressed return on capital employed which is a

proxy for organization performance as function of working capital,turn over and equity was formulated. After the model estimation it was discovered that some of the companies used showed a negative relationship

between working capital and organization profitability, others showed a

positive relationship. It wasalso

discovered that working capital of all the firms do not have significant impact

on their performances during the

period under review. Consequently, it is recommended that firms should

reappraise the trends of their

workingcapitalvisavistheirperformanceswithaviewtochoosingappropriatelevelofcashconversionflow that will not hamper

their profitability. Again, government should provide enabling environment

forbusiness organizations to thrive since literature have shown that business environment tend to

have more impacton organization’s performance and profitability than working capital especially in a

developing country likeNigeria.