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The Effect of Working Capital Management on Corporate Profitability: Evidence from Nigerian Food Product Firms

Author

Listed:
  • Sabo Muhammad
  • Rabi¡¯U Saminu Jibril
  • Usman Sani K/Wambai
  • Fatima Bello Ibrahim
  • Tjjani Habibu Ahmad

Abstract

The paper examines the impact of working capital management on corporate profitability through the periods of 2008 to 2012. The total of seven firms listed on the floor of the Nigerian Stock Exchange was studied, using secondary data generated from annual reports and accounts of the sampled companies and the Nigerian Stock Exchange Fact book. The data were analyzed by means of descriptive statistics and GLS regression analysis using STATA 11. The study finds a positive relationship among Average Collection Period (ACP), Current Ratio (CR) and the size of the firm (LOGSIZE) with Profitability and a negative relationship with Inventory Turnover Period (ITP), Average Payment Period (APP). The paper therefore recommends that cash collected should be re-invested into short-term investment to generate profits and fund left idle in the cash or excessive liquidity is costly and do not lead to profitability.

Suggested Citation

  • Sabo Muhammad & Rabi¡¯U Saminu Jibril & Usman Sani K/Wambai & Fatima Bello Ibrahim & Tjjani Habibu Ahmad, 2015. "The Effect of Working Capital Management on Corporate Profitability: Evidence from Nigerian Food Product Firms," Applied Finance and Accounting, Redfame publishing, vol. 1(2), pages 55-63, August.
    • Handle: RePEc:rfa:afajnl:v:1:y:2015:i:2:p:55-63
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    Citations

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    Cited by:

    1. Sidra Tahir & Saira Baloch, 2023. "Role of Working Capital Management in Enhancing Firm Profitability: An Empirical Study on the Manufacturing Companies of Pakistan," Journal of Economic Impact, Science Impact Publishers, vol. 5(3), pages 231-237.
    2. Muhammad Ibrahim Tiwano & Feroz Khan Laghari & Muhammad Fahad & Shahzaib Akram & Laraib Zaman, 2024. "Impact of Interest Rate on Stock Price, Analysis of Stock Movement of Fauji Fertilizer and Engro Corporation Limited: Evidence From Pakistan Stock Exchange," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 13(1), pages 202-208.
    3. Abdul Mateen & Rana Yassir Hussain & Shujah-ur- Rahman, 2023. "Economic Fluctuations and Mutual Fund Performance in Pakistan: A Comprehensive Analysis Including the COVID-19 Period," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 12(3), pages 878-887.
    4. Talwar SHALINI, 2018. "Analysis of Working Capital, ROA and Business Turnover for Firms in the FMCG, Manufacturing and Infrastructure Sectors in India," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 3, pages 22-28.
    5. Dr. Asad Abbas & Dr. Asif Saeed & Asad Abbas, 2023. "Does Ownership Structure and Financial Health Affect Firm’s Earnings Quality? Evidence from Emerging Economy," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 12(4), pages 665-671.
    6. Shah, Mumtaz Hussain & Khan, Fiaz, 2018. "Profitability and Working Capital Management Nexus: Evidence from Food & Personal Care Products Sector Firms Listed on Pakistan Stock Exchange," MPRA Paper 107254, University Library of Munich, Germany.
    7. Guo Xie & Kai Li, 2023. "Does resident leverage volatility affect corporate profitability?: An empirical study from Chinese A‐share listed companies," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1656-1668, April.

    More about this item

    Keywords

    Working Capital; Corporate Profitability; Food Product Firms;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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