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Working Capital Management and Profitability of Selected Quoted Fast Moving Consumer Goods Manufacturing Firms in South-west Nigeria

Author

Listed:
  • Adejuwon Joshua Adewale

    (Department of Management and Accounting)

  • Aderibigbe Ayodele Adegbola

    (Department of Management and Accounting)

Abstract

This research work focused on the working capital management and profitability of selected quoted fast moving consumer goods manufacturing firms in South-west Nigeria. It examined the effect of inventory conversion period, inventory storage cost and cash management on profitability of the selected quoted fast moving consumer goods manufacturing firms. The population of this study consists of twenty one (21) listed fast moving consumer goods manufacturing firms quoted on the Nigeria Stock Exchange (NSE) in Southwest Nigeria between 2015 and 2020. The sample size consist of Eleven (11) viable fast moving consumer good manufacturing firms, which have available and quality data for the time period (convenience sampling technique). Regression analysis was used to analyse the result. The study revealed that cost of sales, inventory storage cost and cash management have negative correlation with Return on Asset, while inventory conversion period has a positive correlation with Return on Asset (ROA). The fixed effect model revealed that inventory storage cost had a positive significant effect on Return on asset at 0.05% level of significant and cost of sales had a negative significant effect on Return on asset. The fixed effect model also revealed that inventory storage cost had a positive insignificant effect on Return n asset, and cash management had a positive significant effect on return on asset. It was concluded that the level of a firm's profitability depends to a large extent on the efficiency and effectiveness of its working capital management. It is therefore recommended that firms should ensure proper management of their working capital elements, cost of sales, inventory storage cost, cash management and inventory conversion period) in order to maintain a satisfactory return on their assets.

Suggested Citation

  • Adejuwon Joshua Adewale & Aderibigbe Ayodele Adegbola, 2022. "Working Capital Management and Profitability of Selected Quoted Fast Moving Consumer Goods Manufacturing Firms in South-west Nigeria," Multidisciplinary Journal of Management Sciences, Association of Forensic Accounting Researchers (AFAR), vol. 4(3), pages 152-168.
    • Handle: RePEc:ris:amjoms:0068
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    References listed on IDEAS

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