Analysis of the Effect of Working Capital Components and Profitability of Selected Quoted Manufacturing Firms in Nigeria

Abstract

This study examined the impact of working capital components on return on sales of the selected manufacturing companies. It specifically examines; the extent to which the components of working capital influence the Return on Sales. Secondary data was used for the study which was extracted from annual reports and accounts of twelve selected manufacturing firms listed on the Nigerian Stock Exchange. The study covered eleven years (2009-2019). Panel data was used to analyze the extent to which the components of working capital influence the return on sales. Findings from the study revealed that ITO (β=.563962, t=2.64, P<0.1) and ARP (β=.0190711, t=2.70, P<0.1) have positive significant effects on ROS. This implied that 1% increase in ITO increases ROS by 0.563962%, and 1% increase in ARP increases ROS by 0.0190711%. The study, therefore, concluded that working capital components such as ITO, ARP, CCC, and FS have a positive significant influence on return on sales and return on assets. This study recommended that proper attention should be given to effective monitoring of short-term assets to maximize shareholders' value.

Cite as

Usman Owolabi, & Nasiru Halimah. (2021). Analysis of the Effect of Working Capital Components and Profitability of Selected Quoted Manufacturing Firms in Nigeria. Journal of Applied Mathematics and Statistical Analysis, 2(2), 1–10. https://doi.org/10.5281/zenodo.5195377