Abstract:
The performance of any company is critical to its survival. Management of working capital involves the management of current assets and current liabilities of a firm. At every given time both the current assets and current liabilities exist in the business. “The working capital plays the same role in the business as the role of heart in human body. Working capital funds are generated and these funds are circulated in the business. As and when this circulation stops, the business becomes lifeless. This study examined the impact of working capital management on firms’ performance by using audited financial statements of a sample of 7 listed companies in the health sector of the Nigerian Stock Exchange for the period of 2015 to 2017. The performance was measured in terms of profitability using return on capital employed and return on equity as dependent variables. The working capital was determined by the Cash conversion cycle, Accounts receivable collection period, inventory turnover period and accounts payables payment period are used as independent working capital variables. More so, control variables like current ratio are used as liquidity indicators, firm size as measured by logarithm of sales, and debt to asset ratio as leverage. The data was analyzed statistical tool, correlation analysis and regression models of cross-sectional and time series data were used for analysis. The study showed that the return on capital on capital employed (ROCE) is negatively related to receivable collection period (ACP), payables payment period (APP), inventory turnover period (ITP), cash conversion cycle (CCC) and debt to asset ratio (DR), which however was insignificant at 5% significance level. However, capital on capital employed (ROCE) was positively related to Current ratio (CR) and firm size (Size), with firm size having significant effect on profits.
