The Effects of Credit Management on Profitability of Manufacturing Firm in Nigeria. (A Study of Selected Companies in Nigerian Stock Exchange)

Abstract

This study examines the effect of credit management on the profitability of manufacturing firm using five quoted firm in Nigeria stock exchange. The intent of the study was to determine whether credit management mechanism: credit policy, liquidity management and debtors’ turnover have effect on profitability of manufacturing firm measured by return on assets (ROA). Data was sourced from annual report of selected companies. It provides empirical evidence for five (5) manufacturing firm in Nigeria for a period of 2010 to 2014. In other to achieve this objective data collected was analyse using descriptive statistics and Jarque-Bera statistics to test for normality of variables. Pearson correlation matrix was used to check for multi-co-linearity presence in a model and to explore the relationship between explanatory variable and the dependent variable. The pooled multiple regression is employed to test the hypothesis. The result reveals that credit policy and liquidity management has significant negative relationship to Return on Assets while debtors’ turnover has significant positive effect to Return on Assets. The researcher recommended that adequate credit policy must be employ by the sales department of the firm for effective operations.

Keywords: credit policy, firm profitability, liquidity management, debtors’ turnover