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Credit Management Policy And Firms’ Profitability: Evidence From Infant Manufacturing Firms In Southwest, Nigeria

Author

Listed:
  • Jayeola OLABISI

    (Federal University of Agriculture, Abeokuta, Nigeria)

  • Dauda Adewole OLADEJO

    (Federal University of Agriculture, Abeokuta, Nigeria)

  • Jonathan Funminiyi ADEGOKE

    (The Federal Polytechnic, School of Management Ede, Osun State, Nigeria)

  • Matthew Adekunle ABIORO

    (Federal University of Agriculture, Abeokuta, Nigeria)

Abstract

Credit management policy concerns managing debtors and financing debts. The higher the amount of debts not collected over a period of time, the higher the maintenance costs incurred which invariably impact on profitability. This study assessed the relationship between credit management policy initiatives and profitability among infant manufacturing firms in Southwest, Nigeria. The study adopted a descriptive research design. The convenience sampling technique was used to select ten (10) infant manufacturing firms and secondary data were extracted from annual reports of the selected firms over a period of ten (10) years (2009-2018). The data collected were analysed using descriptive and inferential statistics. The results of the study showed that there was an insignificant, positive relationship between Current Ratio (CR) and profitability at P>0.05; also, there exists an insignificant, positive relationship between Creditor’s Payment Period (CPP) and profitability at P>0.05. However, Debtor’s Collection Period (DCP) and profitability showed a significant, negative relationship at P

Suggested Citation

  • Jayeola OLABISI & Dauda Adewole OLADEJO & Jonathan Funminiyi ADEGOKE & Matthew Adekunle ABIORO, 2019. "Credit Management Policy And Firms’ Profitability: Evidence From Infant Manufacturing Firms In Southwest, Nigeria," Contemporary Economy Journal, Constantin Brancoveanu University, vol. 4(4), pages 59-69.
    • Handle: RePEc:brc:brccej:v:4:y:2019:i:4:p:59-69
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    References listed on IDEAS

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    1. Omar Durrah & Abdul Aziz Abdul Rahman & Syed Ahsan Jamil & Nour Aldeen Ghafeer, 2016. "Exploring the Relationship between Liquidity Ratios and Indicators of Financial Performance: An Analytical Study on Food Industrial Companies Listed in Amman Bursa," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 435-441.
    2. Schwartz, Robert A., 1974. "An Economic Model of Trade Credit," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 9(4), pages 643-657, September.
    3. Marc Deloof, 2003. "Does Working Capital Management Affect Profitability of Belgian Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3‐4), pages 573-588, April.
    4. Marc Deloof, 2003. "Does Working Capital Management Affect Profitability of Belgian Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3-4), pages 573-588.
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    More about this item

    Keywords

    Credit Management; Profitability; Debtors’ Collection Period; Current Ratio; Creditors’ Payment Period;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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