This study examined the impact of working capital management and profitability of 10 quoted manufacturing companies in Nigeria using a cross-sectional time series data for the period 2010 – 2015. The study used secondary data generated from the published annual reports and account of the sampled companies. Data were analysed using correlation and descriptive statistics using SPSS 20. The study reviewed a positive effect of cash conversion cycle (CCC), receivable collection period (RCP), and a negative effect of inventory conversion period (ICP), payables payment period (PPP), on return on assets (a mirror of firms profitability). It was found that cash conversion cycle (CCC) with a positive sign is the most significant precision variable in influencing profitability and liquidity in Nigeria. The study therefore recommended (i) that the firms should promptly collect cash from credit sales, (ii) that excess cash should be reinvested in short-term securities (assets) to generate profits (iii) that since there exists high sales turnover in the Nigeria emerging markets, government policy should target multinational companies (MNCs) for invitation to participate in investing in Nigeria by creating the right legal and regulatory framework to enable them the market for possible FDI, IPI, and FPI injection into the Nigeria domestic economy.
TABLE OF CONTENTS
Title page i
Certification ii
Dedication iii
Acknowledgement. iv
Abstract v
Table of Contents vi
List of Tables ix
CHAPTER ONE
INTRODUCTION 1
1.1 Background information to the study 1-3
1.2 Statement of the problem 4-5
1.3 Significance/justification of the study 5-7
1.4 Objectives of Study 7-8
1.5 Scope of the Study 8
1.6 Research Questions 9
1.7 Research Hypotheses 9
1.8 Limitation to the study 10
1.9 Operational Definition of Terms 10-12
1.10 Case Study/Historical Background 12-14
CHAPTER TWO
LITERATURE REVIEW 15
2.1 Conceptual Framework 15
2.1.1 Concept of Working Capital 16-18
2.1.2. Significance Component of Working Capital Management 18-19
2.1.2.1 Inventory. Management and Profitability 20-22
2.1.2.2 Account Receivables Management and Profitability 22-27
2.1.2.3 Account Payables Management and Profitability 27-29
2.1.2.4 Cash Management . and Profitability 29-31
2.1.2.5 Cash Conversion Cycle and Profitability 31-33
2.1.3 Measurement of Working Capital Management 33-35
2.1.4 Working Capital Policy 35-38
2.1.4.1 Investing in Working Capital 38
2.1.4.2 Short term Financing 39
2.1.5 Concept of Profitability 39-40
2.1.6 Profitability and Liquidity Measures 40-43
2.1.7 Working Capital Management and Firm Profitability 43-44
2.1.8 Consequences of Poor Working Capital Management 44-45
2.2 Theoretical Framework 45-46
2.2.1 Risk and Return Tradeoff Theory 46-47
2.2.2 Resource-Based Theory 47-48
2.3 Empirical Studies 48-51
CHAPTER THREE
3.0 METHODOLOGY 52
3.1 Research Design 52-53
3.2 Population 53
3.3 Sample and sampling Techniques 53
3.4 Method of Data Collection 54
3.5 Reliability and Validity Tests 54-55
3.6 Method of Data Analysis 55-56
CHAPTER FOUR
4.0 RESULTS AND DISCUSSION 57
4.1 Presentation of Results 58-61
4.2 Discussion of Results 61-63
4.3 Interpretation of Results 63-65
CHAPTER FIVE
5.0 CONCLUSION AND RECOMMENDATIONS 66
5.1 Conclusion 66
5.2 Recommendations. 66-67
References 68-73
Appendices
LIST OF TABLES
Table 1 Descriptive Statistics for the Model 58
Table 2 Correlation Analysis of Model 58-59
Table 3 Regression Model Summary 60
Table 4 ANOVA Test of Analysis of Variance 60
Table 5 Coefficient of Determination 61
