ABSTRACT

The study examined the effect of working capital management on the profitability of listed manufacturing companies in Nigeria. The main objective of the study is to evaluate the effect of working capital management on the profitability of listed manufacturing companies in Nigeria. The study specifically investigated the effect of current ratio, quick ratio, inventory days and trade receivable days on the profitability of listed manufacturing firms in Nigeria. To achieve the stated objectives, an ex-post facto research design was used through the published annual reports of the companies. The hypotheses were tested using multiple regression analysis. The findings revealed that there is a significant relationship between the working capital variables and the profitability of the companies. However, while some of the companies recorded a positive relationship, others recorded a negative relationship. The study recommends that poor performing firms should adequately plan and control their operations, adjust all the short falls as noted from the financial ratios calculated and bring them to standard in order to ensure the management of working capital variables.

Certification    ii

Approval iii                                                   

Dedication                                                                iv      

Acknowledgements                                                  iv          

Table of Contents                                                                                  v

Abstract vi

1.1 Background to the study 1 

1.2 Statement of the Problem 3 

1.3 Objectives of the study 4

1.4 Research Questions 5

1.5 Research Hypotheses 5

1.6 Significance of the Study 6

1.7 Scope of the study 7

1.8 Limitation of the study 7

2.1 Conceptual Framework 8

2.1.1   Composition of Working Capital 9

2.1.2      Working Capital Management 11

2.1.3 Working Capital Policy 12  

 2.1.4 Working Capital Cycle 13

2.1.4 Element of Working Capital Inventory 14

2.1.5 Management of Trade Debtors or Accounts Receivable 15

2.1.6 Management of Cash 15

2.1.8 Management of Creditors or Accounts Payable 17

2.1.9   Management of Marketable Securities 19

2.1.10 Working Capital Financing 20

2.2 Theoretical Framework 21

2.2.1 The Cash Conversion Cycle Model (CCC model)  21

2.3 Review of Related Empirical Literature 24

3.1 Research Design 30

3.2 Area of the Study 30

3.3 Method of data collection 30

3.4 Method of Data Analysis 30

3.5 Model Specification 30

3.6 Description of Research Variables 32

3.7 Decision Rule 32

4.1 Presentation of Data 33

4.2 Data analysis 38

4.3 Hypothesis Testing 42 

4.4 Discussion of Result 44

5.1 Summary of Findings 46

5.2 Conclusion 46

5.3 Recommendations    47 

References 48

Appendix  50