Impact of Working Capital Management on Profitability of Quoted Manufacturing Firms in Nigeria

Abstract

This study investigates the effect of working capital management on profitability of quoted firms in Nigeria. The study uses 110 firms on Nigerian stock market over a period of 11 years from 2010 to 2020. The statistical approach is Ordinary least squares (OLS) model was employed to address econometric issues and to improve the accuracy of the regression coefficients. The empirical results show positive and significant effects of the working capital management, which measured by cash Ratio and two components of the Cash Ratio including inventory turnover in days, and trade payable turnover in days on the firm’s profitability measured Cash ratio. The study assures that there is significant Effect of Working Capital Management on Profitability of quoted firms in Nigeria. Given the R2 value of 0.024352 of the regression analysis as well as the adjusted R2 value of 0.003261, which is less than 0.05, there is enough evidence to reject the null hypothesis. This result implies that the overall regression is positive and statistically significant at 5% level of significance, given that the R2 value is 0.024352 less than 0.05.