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WORKING CAPITAL MANAGEMENT AND FIRMS PERFORMANCE: A STUDY OF MANUFACTURING COMPANIES IN NIGERIA


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Accountancy Department

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ABSTRACT  
This study investigated the relationship between working capital management
measured by account receivable period (ACRP), inventory period (INVP), cash
conversion cycle (CCC) and sales Growth (SG) and profitability performance
measured by returns on assets (ROA). The study utilized secondary data obtained
from the annual financial statements of Nigerian Manufacturing companies listed
on the Nigerian Stock Exchange (NSE) for period 2008 - 2012. Multiple
regression model were adopted for testing all the hypotheses and the study result
reveals that there was a negative significant relationship between the account
receivable period and profitability of the Nigerian Manufacturing companies. It
also reveals that the profit is significantly influenced by the number of days
inventory were held (INVP) and that the profitability performance negatively and
significantly related to the cash conversion cycle (CCC). These results suggest that
effective policies must be formulated for the individual components of working
capital. Furthermore, efficient management and financing of working capital
(current assets and liabilities) can increase the operating profitability of
manufacturing firms 
TABLE OF CONTENT
Content          Page
Title page - - - - - - - - - - i
Declaration  - - - - - - - - - - ii
Approval - - - - - - - - - - iii
Dedication - - - - - - - - - - iv
Acknowledgements - - - - - - - - - v
Abstract - - - - - - - - - - vi 
List of tables  - - - - - - - - - xi
List of figure  - - - - - - - - - xi 

CHAPTER ONE : INTRODUCTION
1.1 Background to the Study  - - - - - - 1
1.2 Statement of the Problem  - - - - - - - 3
1.3. Objectives of the Study  - - - - - - - 4
1.4 Research Questions  - - - - - - - - 5
1.5 Research Hypotheses  - - - - - - - 5
1.6 Scope of the Study   - - - - - - - 6
1.7 Significance of the Study  - - - - - - - 7 
References  - - - - - - - - - 8

CHAPTER TWO: REVIEW OF LITERATURE  
2.0. Introduction  - - - - - - - - 10
2.1. Conceptual Review   - - - - - - - 10 
2.1.0. Concepts of Working Capital Management  - - - - 10
2.1.1. Working Capital  - - - - - - - - 10 
2.1.2. Working Capital Management  - - - - - - 12 
2.1.3 Working Capital Management Efficiency - - - - - 13 
2.1.4. Policy of Working Capital - - - - - - - 13 
2.1.5. Working Capital Cycle - - - - -- - - 16
2.1.6. Components of Working Capital Management (WCM) - - - 18 
2.1.7. Cash Management - - - - - - - - 19 
 2.1.8 Cash Positioning - - - -- - - - - 22 
2.1.9 Cash Flow Volatility, Earnings Volatility and Firm Value. - - 23
2.1.10 Cash Budget  - - - - - - - - - 25 
2.1.11. Management of Cash Receivables - - - - - 26
2.1.12. Credit Standards  - - - - - - - - 26
2.1.13. Credit Extension Policy - - - - - - - 27
2.1.14. Credit Collection Policy  - - - - - - - 28 
2.1.15. Inventory (Inv) Management - - - - - - 29 
2.1.16. Need to Hold Inventory  - - - - - - - 30 
2.1.17  Inventory Control  - - - - - - - - 31
2.1.18.  The Economic Order Quantity (EOQ) - - - - - 31
2.1.19. Re-Order Point - - - - - - - - 32
2.1.20. Relation to Financial Management - - - - - 32 
2.1.20.1. Payables Management - - - - - - - 33
2.1.21.  Receivables Management - - - - - - - 33 
2.1.22.  Cash Conversion Cycle (CCC) Management - - - - 34
2.1.23.  Measures of Profitability - - - - - - - 34 
2.1.24.  Liquidity  - - - - - - - - - 36 
2.1.25. Nature of Working Capital - - - -- - - - 37
2.1.26. Trade-Off between Profitability and Risk - - - - 37
2.1.27. The Efficient Management of Firm’s Working Capital  - - 38 
2.1.29 . The Consequences of Inefficient Management of Working Capital  39
2.1.30. The Costs and Benefits of Firm’s Investments in Working Capital - 44
2.1.31. The Nigerian Economy and Working Capital Management of Quoted  
Firms in Nigeria =- - - - - - - - 46 
2.20. Theoretical Review - - - - - - - - 47 
2.2.1. The Operating Cycle Theory  - - - - - - 48
2.2.2. The Cash Conversion Cycle (CCC) Theory  - - - - 48 
2.2.3. The Pecking Order Theory - - - - - - - 49
2.2.4  Agency Theory - - -- - - - - - 50
2.2.5. The Risk –Return Trade-Off Theory - - - - - 51
2.3.0. Review of Empirical Studies - - - - - - 51
2.3.1. Summary of Literature Review  - - - - - 57 
References - - - - - - - - - - 58
 
CHAPTER THREE: METHODOLOGY 
3.0 Introduction  - - - - - - - - - 60
3.1 Research Design  - - - - - - - - 60
3.2 Population of the Study  - - - - - - - 61
3.3 Sampling Techniques and Sample Size - - - - - 61 
3.4 Sources of Data Collection  - - - - - - - 61
3.5 Variables Used for the Study  - - - - - - 62
3.5.1 Dependent Variable  - - - - - - - - 62
2.5.2 Independent Variables  - - - - - - - 63
3.6 Data Analysis Techniques  - - - - - - - 65
3.7 Model Specification  - - - - - - - 66
3.8 Limitation of the Study  - - - - - - - 66 
References  - - - - - - - - - 68 

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND 
 INTERPRETATION
4.0 Introduction  - - - - - - - - 69
4.1. Presentation and Analysis of Multiple Regression Results - - 70 
4.2. Data Validity Test - - - - - - - - 71
4.3. Summary of Regression Results   - - - - - 72
4.4. Testing of Research Hypotheses  - - - - - 73
4.5. Interpretation of results and discussion of findings - - - 75
4.5.1. The Impact of ACRP on Profitability  - - - - 75
4.5.2. The Impact of Inventory Period (INVP) on Profitability - - - 75
4.5.3. The Impact of Cash Conversion Cycle (CCC) on Profitability  -  76
4.5.4. The Impact of Sales Growth (SG) on Profitability  - - - 76 

CHAPTER FIVE:  SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1. Introduction   - - - - - - - - 78
5.2. Summary  - - - - - - - - - 78
5.3. Conclusions  - - - - - - - - - 80
5.3.1 Policy Implication - - - - - - - - 81
5.4. Recommendations - - - - - - - - 81
5.5. Suggestions for Further Research  - - - - - - 82 
Bibliography  - - - - - - - - - 83
Appendices  - - - - - - - - 86 
.

📄 Pages: 112       🧠 Words: 9886       📚 Chapters: 5 🗂️️ For: PROJECT

👁️‍🗨️️️ Views: 329      

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