By Duru, Anastesia Nwakaego
This study examined the impact of working capital management on the profitability of Nigerian quoted
Manufacturing firms. The working capital variables studied comprise accounts payable, accounts
receivable, cash conversion cycle, stock/inventory turnover and liquidity. This study also used sales growth
and Debt as control variables in examining the impact of working capital management on the profitability of
Nigerian firms. Secondary sources of data were sourced from the Annual Reports of the 22 manufacturing
firms selected for this study for the period 2000-2011. Five Hypotheses were estimated with the use of
Generalized least square multiple regression. The findings of the study show that, accounts payable ratio
[AP] had negative relationship with the industries’ profitability. On the other hand, accounts Receivable
ratio [AR] had positive and significant relationship with profitability of the firms studied. Stock turnover
ratio had negative and significant relationship with profitability of the firms under study. Results also show
that firms cash conversion cycle [CCC] had positive but non-significant relationship with the industries
profitability, and Liquidity ratio had negative relationship with the industries profitability. Based on the
findings of the study, the following recommendations were made; there should be a balance between
liquidity and profitability. They should also avoid stock-outs because of the huge sales they made during the
years under study. They are encouraged to reduce their cost of sales to make more profit. There should also
increase their credit sales so as to have enough cash to settle their obligations. Specialized persons should be
hired by these companies for expert advice on working capital management. One of the greatest
contributions of this study is the perspective we followed in the measurement of variables (Descriptive and
four functional models of multiple regression).