Impact of Average Payments Period on the Return on Assets of Quoted Insurance Companies in Nigeria

Abstract

A properly designed and implemented payables management is expected to contribute positively to the insurance firm’s profitability. The purpose of this study is to determine the impact of average payments period on profitability of quoted insurance companies in Nigeria. The study was carried out using Return on Assets as dependent variable and Average Payments Period as explanatory variable. Return on Assets was used as a measure of profitability Data were collected from the annual financial reports of 20 sampled insurance companies. Multiple regression technique was used in analyzing the model for testing the hypothesis. Current Ratio, Fixed Financial Total Asset Ratio, Debt Asset Ratio, Growth and Size were incorporated in the model as control variables. The results indicated that Average Payments Period has a significant negative impact on profitability. Based on the findings, the study recommends that Nigerian insurance companies should endeavour to reduce their number of days accounts payables optimally and concentrate on reducing the high variability in the average payables period to enhance their corporate profits.

Keywords: Average Payables Period, Accounts Payable, Return on Assets, Profitability, Nigeria.