A Disaggregated and Comparative Analysis of Working Capital on the Performance of Manufacturing Firms in Nigeria (A Study of Nestle and Cadbury Nigeria PLC)

Abstract

The study empirically examined working capital on profitability of manufacturing firms in Nigeria. The objective of the study was to examine the effect of working capital components on the performance of manufacturing firms. Desk survey method was used in gathering relevant information. Data were extracted from Annual Report and Account of various years using Nestle and Cadbury Nigeria Plc. Multiple regression of ordinary least square (OLS) model was used to establish the relationship between independent and dependent variables using ROE as proxy. The findings in equation one revealed that account receivable, inventories, account payable and cash had negative effect on Return on Equity in Nestle Nigeria Plc. Equation two showed that, account receivables, inventories and cash had negative relationship on Return on Equity in Cadbury Nigeria Plc. The study recommended that management of Nestle and Cadbury Nigeria Plc should be more efficient in management of working capital and proper management of each working capital components should be kept at optimal levels.

Keywords: Account Payable, Account Receivable, Cash, Inventory, Return on Equity