Mountain Top University Library

Working capital management is one of the most vital areas while making the profitability
comparison among firms and involves the decision of the amount and composition of current assets
and the financing of this assets. Working capital management is necessary because of its effect on
profitability and risk and also determines the running of the business firm, and consequently, its
value and long term survival of the firm. The success of these companies depend largely on proper
financing and management of working capital. Many consumer goods firms are facing problems
with their collection and payment procedures, strategy and policies as well as not paying attention
to inventory basis. These have negatively affected profitability of the firms and in turn have
affected the value of the companies. This study examined the relationship between working capital
management and profitability of selected consumer goods firms in Nigeria.
The objectives of this study is to evaluate and examine the relationship between net working
capital, debtors collection period, creditors payment period, and inventory conversion period on
the profitability of firms in consumer goods sector in Nigeria.
This research study adopts descriptive research design and ex-post factor research design. The
population of the study comprised the 25 consumer goods firms listed at the Nigerian Stock
Exchange, as at December 2017. Purposive and convenience sampling technique were used to
select 19 companies out of 25 quoted companies in the industry which have complete data till at
least 2017 in the Nigerian Stock Exchange Fact Book. Time series were extracted using secondary
source from the published financial statements of the firms and Nigerian Stock Exchange from
2013- 2017. Data were examined and analyzed quantitatively using descriptive and inferential
statistics.
Findings revealed that net working capital had positively and no significant effect on the return
on assets of selected consumer goods sector in Nigeria(R
2 = 6%; Adj R- sq= -5%; and F- stat
=.5.32, p<.05) . Debtor’s collection period has positively and non-significant effect on return on
asset of selected consumer goods sector in Nigeria (R
2 =3%; Adj R –sq= -7%; and F-stat=3.09,
p<.05). Creditors payment period also influenced return on assets of selected consumer goods
sector in Nigeria (R
2 = 1%; Adj R- sq = -2%; and F-stat = 8.36, , p<.05). Inventory conversion
period influenced return on assets of selected consumer goods sector in Nigeria (R
2 =9%; Adj Rsq = -10%;and F-stat =0.095, , p<.05).
The study concluded that working capital management have no significant influence on
profitability of consumer goods sector in Nigeria. It was recommended that management of
selected consumer goods firms should pay close attention and focus to sound management of their
working capital management components as they influenced their profitability.
Keywords: Creditors payment period, debtor’s collection period, inventory conversion period, net
working capital, and profitability