WORKING CAPITAL MANAGEMENT AND FINANCIAL PERFORMANCE OF INDUSTRIAL GOODS COMPANIES IN NIGERIA

Efficient management of working capital is crucial for the survival of any business. Holding excessive cash leads to idle funds and reduced profits, while insufficient cash hampers operational efficiency. Therefore, the purpose of this study is to examine the relationship between working capital management and the financial performance of industrial goods companies in Nigeria. The study measures working capital management (WCM) using proxies such as accounts receivable management, accounts payable management, inventory management, and the cash conversion cycle. The dependent variable, financial performance, is measured by return on assets (ROA). Data for the study were collected from the financial statements of the selected thirteen (13) companies over a seven-year period from 2016 to 2022. Stata 13 software was employed for analysis. The findings reveal that accounts payable management and the cash conversion cycle are positive and statistically related to ROA. Conversely, inventory management has a negative and significant relationship with ROA, while accounts receivable management has a negative but insignificant relationship with ROA. The study concludes that WCM is essential in enhancing the performance of industrial goods firms in Nigeria. The study recommends that industrial goods companies should actively implement policies to prevent debtors from delaying payments beyond due dates, thereby avoiding cash traps. Improving cash collections should be prioritized, and fostering closer relationships with customers and suppliers can strategically delay payments and facilitate the optimal utilization of cash within the company. Such effective management of payment terms can enhance the cash flow required for financing operational activities.

1 29 Mar, 2024

pg: 15

JBMIC PORTAL SYSTEM

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