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Cash Management and Corporate Profitability: A Study of Selected Listed Manufacturing Firms in Nigeria

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  • Olubukunola Uwuigbe

    (Covenant University, Nigeria)

  • Uwuigbe Uwalomwa

    (Covenant University, Nigeria)

  • Ben-Caleb Egbide

    (Covenant University, Nigeria)

Abstract

Cash has always being disregarded in financial decision making since it involves investment and financing in short term period. However, it is an important component in firm financial management decision. This study therefore investigates empirically the relationship between cash management and profitability in listed manufacturing companies in Nigeria. Cash conversion cycle is used as the measure for cash management as used in Raheman and Nasr (2007). Current ratio, debt ratio and sales growth were used as control variables. This study utilizes secondary data while Pearson’s correlation and regression analysis were used in analyzing the data for a sample of 15 listed manufacturing companies in Nigeria between 2005-2009.The results of the empirical findings show that there is a strong negative relationship between cash conversion cycle and profitability of the firms. It means that as the cash conversion cycle increases it will lead to decreasing profitability of the firms. The study therefore recommends that managers can create a positive value for the shareholders by reducing the cash conversion cycle to a possible minimum level and also accounts receivables should be kept at an optimal level. This study will also help companies in nigeria see the need for cash mangement techniques.

Suggested Citation

  • Olubukunola Uwuigbe & Uwuigbe Uwalomwa & Ben-Caleb Egbide, 2012. "Cash Management and Corporate Profitability: A Study of Selected Listed Manufacturing Firms in Nigeria," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 1(1), pages 49-59, March.
    • Handle: RePEc:dug:actaec:y:2012:i:1:p:49-59
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    References listed on IDEAS

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    2. 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.
    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.
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    1. Yusuf Aminu, 2012. "An Analysis of Proposed Framework on Impact of Working Capital Management on the Profitability of Selected Manufacturing Companies Listed on the Nigerian Stock Exchange," Journal of Economics and Behavioral Studies, AMH International, vol. 4(12), pages 730-736.

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