Working Capital Management and Profitability: Evidence from Quoted Food and Beverages Manufacturing Firms in Nigeria

Abstract

The study investigated the relationship between working capital management measured by Aggressive Investment Policy (AIP), Account Collection Period (ACP), Inventory Conversion Period (ICP), Average Payment Period (APP), Cash Conversion Cycle(CCC) and Net Operating Profit of quoted food and beverages manufacturing firms in Nigeria. Survey research design was employed using primary data. Regression analysis (OLS) was used to establish the relationship.It was found that Working capital management had significant positive relationship with profitability; Cash conversion cycle and Aggressive investment policy had insignificant positive relationships with profitability. Account collection Period had significant negative relationships with profitability;Inventory Conversion Period and Account Payment Period had insignificant negative relationship with profitability. Therefore, It was recommended that; there should be a reduction in the average collection period of quoted food and beverages manufacturing firms in Nigeria in order to increase their profitability. The management of food and beverages manufacturing firms in Nigeria should be more efficient in the management of working capital by reducing their cash conversion cycle in order to have improved  profitability.

Key Words: Working Capital Management, Profitability, Account collection period, Aggressive Investment Policy, Cash Conversion Cycle.