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Working Capital Management and Profitability: A Study of Selected listed manufacturing Companies in Nigerian Stock Exchange

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  • A.Y. Salman
  • Oyetayo O. Folajin
  • A.O. Oriowo

Abstract

The present study has investigated the relationship between working capital management on organizational profitability in Nigeria with special reference to manufacturing companies quoted in Nigerian Stock Exchange. The data used for this study were derived from the audited finance statements of the firms listed on the Nigerian Stock Exchange (NSE) between 2005 – 2013 which comprises of twenty (20) manufacturing sectors was finally used as sample size. Panel data methodology was adopted because it combined time series and cross sectional data. The method of analysis is that of Pearson Correlation Moment Coefficient and multiple regressions and the method of estimation is Ordinary Least Squares (OLS). The result showed that working capital has negative and significant relationship with the Return on Assets (ROA) and Return on Equity (ROE) at 5% level. This implies that firms’ performance can be increased with short size of Cash Conversion Cycle and the study recommended that cash conversion cycle should be reduced and inventory should be turned out quickly.

Suggested Citation

  • A.Y. Salman & Oyetayo O. Folajin & A.O. Oriowo, 2014. "Working Capital Management and Profitability: A Study of Selected listed manufacturing Companies in Nigerian Stock Exchange," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(8), pages 287-295, August.
    • Handle: RePEc:hur:ijarbs:v:4:y:2014:i:8:p:287-295
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    References listed on IDEAS

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    1. 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.
    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.
    3. Sushma Vishnani & Bhupesh Kr. Shah, 2007. "Impact of Working Capital Management Policies on Corporate Performance—An Empirical Study," Global Business Review, International Management Institute, vol. 8(2), pages 267-281, December.
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    Cited by:

    1. Sujan Chandra Paul & Md. Asiqur Rahman & Jiasmin, 2021. "Current Assets, Current Liabilities and Profitability: A Cross Industry Analysis," Journal of Asian Business Strategy, Asian Economic and Social Society, vol. 11(1), pages 55-68, June.
    2. Abdul Basyith & Abid Djazuli & Fitriya Fauzi, 2021. "Does Working Capital Management Affect Profitability? Empirical Evidence from Indonesia Listed Firms," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(3), pages 236-251, March.

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