Impact Of Working Capital Management On The Profitability Of Listed Pharmaceutical Firms In The Nigeria Stock Exchange

ABSTRACT

The study analysed the effects of working capital management on the profitability of pharmaceutical firms listed on the Nigerian Stock Exchange. Data was obtained from document analysis of consolidated financial reports of years ending December: 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013 and 2014. Multiple regression and correlation analyses were carried out on the data to determine the relationships between components of working capital management and the gross operating profit of the firms. The study established that gross operating profit was positively correlated with Average Collection Period and Average Payment Period but negatively correlated with Cash Conversion Cycle. The relationship between Inventory Turnover in Days and gross operating profit was sign Wcant. Profitability of manufacturing firms depends upon effective working capital management. The study therefore recommended that managers should focus on reducing cash conversion cycles, collect receivables as soon as possible because it is better to receive inflows sooner than later and delay payment of creditors in order to invest the money in short term securities which are profitable.