The Impact of Working Capital Management on Firm’s Profitability: Evidence from Selected Quoted Multi-Sectoral Firms in Nigeria

Abstract

The primary objective of this study is to investigate the impact of working capital management on the profitability of twenty quoted multi-sectoral firms in Nigeria. The data used for this study was extracted from the annual report and financial statements of twenty quoted firms in our sample for the period of fifteen years (2005 - 2020) cutting across petrochemicals, publishing, food & beverages, manufacturing, pharmaceuticals and hospitality. The authors utilised the random-effects generalized least squares econometric technique to analyse the data collected from 2005-2020. Findings shows that an increase in the debt conversion period of multi-sectoral firms wields a reducing effect on the profitability of selected quoted multi-sectoral firms in Nigeria. Furthermore, an increase in the inventory conversion period wields a reducing effect on profitability of selected quoted multi-sectoral firms in Nigeria, while an increase in creditors’ conversion period had no significant effect on the profitability of selected quoted multi-sectoral firms in Nigeria. A projected increase in the speed of the cash conversion cycle wields an increasing effect on the profitability of selected quoted multi-sectoral firms in Nigeria. Policy recommendations are proffered herein.